Global investors have as much as £46bn trained on London’s office investment market, according to research, as property dealmakers in the capital brace for a flurry of activity when it emerges from lockdown.
London’s reputation as a safe haven, along with the removal of the no-deal Brexit risk over the Christmas period, is set to attract a glut of new money in the coming years, said Knight Frank researchers.
Investors from the greater China region, including Hong Kong, are set to be the largest source of capital, at £12.6bn, while the rest of the Asia-Pacific region has about £10.8bn ready to be deployed. European investors are said to have £5.5bn aimed at London.
Nick Braybrook, head of London capital markets at Knight Frank, said: “Overseas demand for high-quality London office investments has once again proved amazingly resilient.
“All markets have faced extraordinary challenges, but prime London assets demonstrated their liquidity all through the pandemic.
“As markets recover, from both the pandemic and the Brexit uncertainty pervading since 2016, the race will be on again for this wall of capital to secure the best assets – the question now is who will be the sellers?”
Despite uncertainty over the role of the office in the coming years, researchers said that London could even face a substantial shortage of office space.
Knight Frank is tracking 26.6m sq ft of pipeline office developments across London for completion over the next 15 years, but finds that only 3.2m sq ft will be delivered to the market speculatively (ie without having secured a tenant and available to let) by 2024.
In contrast, the long-run annual average take-up of new and refurbished space is 5.3m sq ft. Over the longer-term, this supply and demand imbalance will begin to put greater upward pressure on rents for best-in-class space.
Faisal Durrani, head of London commercial research at Knight Frank, added: “In spite of the UK’s ongoing lockdown, London remains top of investor wish lists, supported by yields that remain above those of most major global cities.”