US investment in London real estate totalled £1.9bn in the first quarter, its highest level in eight years, according to BNP Paribas Real Estate.
The agent found that 63% of the total £3bn invested by US buyers into UK real estate in the first quarter was spent on commercial property acquisitions in the capital. The £1.9bn total was the highest recorded since Q4 2015, when it amounted to £2.7bn.
Total UK inward investment from US-based buyers soared by 64% year-on-year in Q1, from £1.9bn.
Researchers said the findings showed US-based investors are seeing more value in asset pricing in the UK market than they are domestically, citing “more favourable” leasing fundamentals and the strength of the dollar against the pound.
Investment activity from US-based buyers into the UK during Q1 surpassed the five- and 10-year quarterly averages of £2.8bn and £2.6bn respectively.
Total UK inward investment from US-based buyers closed at £7.6bn in 2023, which was the lowest annual recorded total since 2018 at £6bn. Early activity suggested the UK is on track to exceed this in 2024.
Charlie Tattersall, senior associate director, capital markets research at BNP Paribas Real Estate, said: “The US CRE market continues to face some turbulence in the form of foreclosures, tight financial conditions and a slow pace of return of staff to office spaces.
“At the same time, geopolitical instability and stronger-than-expected economic growth relative to Europe has strengthened the dollar and widened the spread between US and European debt costs. As a result, capital is increasingly being driven towards markets such as central London, where leasing fundamentals are more attractive and the currency effect more favourable.”
Simon Williams, head of national markets at BNP Paribas Real Estate, added: “London and much of the UK may now offer the value correction narrative which supports opportunistic and value-add-led investment plays from US capital. As interest rates begin to come down materially in the coming months and liquidity gradually improves, we anticipate this trend to persist as the real estate recovery continues to play out into the second part of this year and beyond.”
London hotel and office transactions dominated the £1.9bn Q1 2024 total, at £871m and £575m respectively, backed by deals including BT Group’s £275m sale of the BT Tower to MCR for hotel redevelopment, and Langham Estate’s £300m mixed-use portfolio sale to Oval Real Estate and Elliott Management.
Fergus Keane, head of central London capital markets at BNP Paribas Real Estate, said: “This positive uplift into this new cycle tells us US capital is firmly back in the market.”
He added: “Despite continuing macroeconomic volatility, London’s pricing and occupational market are compelling enough for investors to begin targeting the commercial real estate sector again.”
Keane also noted that the US election was “certainly at play” as an investment lever.
Elsewhere, according to the firm’s latest Q1 2024 London office data, City prime rents have increased from £75 to £77.50 per sq ft and Mayfair/St James’s from £150 to £155 per sq ft.
Image by Ismail Merad/Unsplash
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