UK - Investment in London commercial property has risen for the first time since the second half of 2007, according to new figures from Cushman & Wakefield.
Statistics related to investments made between April and the end of June indicate £1.43bn (€1.66bn) was invested in central London's main West End and City & Docklands markets in Q2 - an increase of over 110% on total first quarter investments worth £679m.
The firm is now predicting the central London property investment will be among the first to recover in Europe and has argued overseas investors are seeing value now yields at an historic high, and said interest has surfaced among French, German and Italian investors.
The West End market is said to have seen the most activity in the last three months as £733m has been invested in commercial real estate - an increase of over 250% on the £207m spent in the first three months of this year.
The average lot size was also said to be £23.6m up from £14.7m in Q1 and overseas private buyers have dominated the market by taking 38% of purchases, while overseas investment funds have snapped up another 22% of the properties, according to Clive Bull, head of central London investment and a partner in Cushman & Wakefield's London group.
"The most significant observation is the dominance of the overseas investor," said Bull. "Over 60% of West End transactions have been completed by overseas funds or private organisations. Their interest has been fuelled by a perception that the London market represents relatively good value, the continuing weakness of the pound and the lack of competition from the traditional UK/Irish debt buyers."
He continued: "The question exercising the minds of many investors, however, is whether this activity is the start of the recovery or some kind of false dawn. There is encouraging evidence that it is the former with a further £275m of stock under offer in the West End and £167m of deals which have exchanged but yet to complete."
While the evidence suggests interest is improving C&W is quick to point out that a single transaction accounts for the bulk of activity, as the Oman Investment Authority took an 80% stake in Hammerson's Bishop's Square development for £440m (at a 7.3% yield) in Q2.
Similarly, a City deal which has exchanged but is yet to complete is the sale of Friary Court, 65 Crutched Friars, EC3 for around £42m - a property which in 2008 could not sell at a 7.5% yield but is now thought to have exchanged at a 6.8% yield; evidence that "prime City of London yields are now the first to harden", according to C&W.
