Despite Brexit or because of Brexit, Central London's office investment market had a stellar year in 2016, with total turnover expected to reach £17 bn (€20 bn).
The figure, according to Savills, the international real estate advisor, is 20% above the long-term average of £14.4 bn and is close to the record 2015 figure of £19.4 bn.
The surge in interest in Central London offices was led by overseas investors, mainly Asian and European, and was largely due to the currency shift, following the fall in the value of the pound after the EU referendum.
'The weakness of Sterling following the EU referendum has encouraged a flow of international money into London with an effective discount of 10-15% on entry prices for investors whose currency is pegged to the US dollar,' said Rasheed Hassan, head of crossborder investment at Savills.
'Pricing overall has been easing off its high water mark since June 2015 and with these factors combined we have never seen such a level of interest in London from Asian investors, particularly those from Hong Kong, as we do today.'
Asian firms invested £4.5 bn into the Central London real estate market up to the end of November, accounting for nearly a third of turnover, the greatest market share on record. Asian investors have been active in the City market as well, accounting for 85% of activity since the June referendum.
Examples include new entrants like Asian Growth Properties acquiring 20 Moorgate for £155 mln, and Kingboard Chemical Holdings who bought 1 Fore Street for £271 mln.
Total turnover in the City was £8.7 bn, including deals such as Brookfield buying CityPoint for £560 mln and Brookfield and China Life buying Aldgate Tower for £346 mln. In the West End of London the turnover was £8.1 bn.
'Central London's office investment market has been on the world stage more than ever in the second half of 2016 and total turnover reflects the ongoing appetite for what continues to be regarded as a global gateway city,' said Stephen Down, head of Central London investment at Savills. 'We remain realistic of course, but with prime yields ranging between 3-6%, commercial property continues to be an attractive asset class for investors.'
Compared to 2015, Savills says prime yields have moved out by 25 basis points in 2016 in both the City and West End markets to end the year at 4.25% and 3.25% respectively.
