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London commercial property booms on foreign interest
Brief:Cash from Asia including China and the Middle East is being placed in London property market because of its perceived status as a safe haven.
 
Investment in central London’s commercial property market has got off to a record-breaking start in 2014 as international capital rushes into the city.
 
In the first three months investment volumes topped £4.3bn, according to figures from real estate services company Cushman & Wakefield – a record for the quarter.
The figure covers 32 transactions including the sale of the More London estate to Kuwaiti sovereign wealth fund St Martins for £1.7bn, one of the UK’s largest commercial property transactions to date.
 
Overseas investors accounted for more than three-quarters of spending. Investors from around the world have been rushing to snap up London property in recent months, motivated by a search for returns in the low-yield environment, and a perception that real estate assets in Britain are secure.
 
In particular, cash from Asia including China and the Middle East is being placed in London because of its perceived status as a safe haven.
 
But competition from domestic investors is increasing as the UK economy improves, and with it occupier demand. Two-thirds of transactions in the quarter involved UK-based buyers.
 
Prices are rising and yields becoming compressed. Bill Tyser, a partner in Cushman’s City investment team, said: “As the second-phase rental recovery builds, coupled with positive outlooks on the UK economy and employment growth into London, we can expect continuing strong activity and further yield compression as we move through 2014.”
 
Growth in investment volumes was concentrated in the City and Docklands, which accounted for three-quarters of the total spend.
 
Sales volumes in the West End declined 20 per cent year on year to £824m in the quarter, mainly as a result of a lack of new development. Investor demand was considerable.
The previous high for first-quarter investment volumes in central London was £3.94bn in 2007.
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