Wealthy middle-eastern investors drive growth in London office market
Wealthy Middle-Eastern investors are driving sales in London’s office market, as reduced competition acts as an opportunity.
November was the busiest month for Middle Eastern office investors since before the pandemic, a new study by BNP Paribas has shown, with total investment reaching over £600m.
James Carrington, head of City investment at BNP Paribas Real Estate said that central London commercial investments have become more attractive in recent months to overseas buyers.
He explained: “Middle Eastern cost of capital is now more in sync with what the market has to offer, with sovereign wealth funds, institutions and family offices becoming more active across the risk-return spectrum spanning core, core+, and value add.
“There is also less competition for deals over £100m facilitating opportunities for Middle Eastern investors to provide liquidity in the market.”
A push to homeworking following the pandemic battered London’s commercial property market and led to many office spaces decreasing in value.
However, Carrington said that the West End as well as core Canada locations have seen further movement in yields and are now providing “some interesting opportunities”.
He added: “This, combined with continued strong rental growth prospects for best-in-class assets, particularly in the core West End where supply remains constrained, creates the potential to realise excellent returns over the next 5 years.”
Victoria Allner, director in the private client and international department at Strutt & Parker/BNP Paribas Real Estate comments also said that “Prime Central London (PCL) continues to be an attractive marketplace for international buyers.
She explained: “While premium values have barely shifted over the past year thanks to the market’s discretionary nature, those buying with dollar-based currencies, such as the US, Middle East and Asia have been able to capitalise on a weak pound and have made their own savings.”
“This all started at the end of September 2022 with the pound dropping to record lows coupled with anticipated increases in PCL values over the next five years.”
She added: “This combination fuelled international investment into London’s prime real estate, a trend which has continued over the last year dominated by cash buyers or those with access to more attractive lending.”