Domestic buyers behind half of London deals as travel restrictions continue

It is the first time since 2006 that domestic buyers have accounted for more than half of all investment activity in central London’s commercial property market as the UK capital City has evolved into one of the most sought-after investment markets for global capital.
 
European investors remain the top overseas investor group operating in the market with a 17% market share (£1.356 bn). This compares to Asian investors (12% market share), North American (10%) and Middle Eastern (7%).
 
According to the latest figures from Savills, £1.275 bn was transacted in central London’s commercial property market in the third quarter of 2020, taking the total volume invested year-to-date to £4.362 bn. 2020 volumes mark a 46% drop on 2019 activity which saw over £8 bn invested between Q1-Q3, and a 58% drop on the five year rolling average for this period.
 
‘Traditionally the quietest quarter for activity, Q3 in 2020 has seen investment volumes further reduced by the ongoing travel restrictions brought about by the Covid-19 pandemic preventing a large pool of global buyers to view properties and trade in London,’ said Stephen Down, head of the central London investment team at Savills.

‘With a huge wall of global capital looking to find a home, and a significant proportion deriving from property funds and pension vehicles that need to act before the end of the year, we are anticipating a notable uptick in investment activity in the final quarter.’

This is reflected by the increase in available stock on what has been a starved market, with circa £6.58 bn of assets known to be available in London. ‘However,’ Down added, ‘not all of these buildings will sell and, as the search for core/ core+ risk-free assets becomes ever more pronounced amidst the ongoing uncertainty, the gap between prime and secondary is expected to grow and pricing needs to reflect this.’
 
Savills Prime Yields remain at 4.00% in the City and 3.75% in the West End.