The Chinese may have made the headlines recently with their acquisitions of trophy assets in the City of London, but European investors, especially from Germany, have been quietly snapping up commercial properties in the UK, experts said at the PropertyEU Global Capital Flows briefing, which was held in London this week.
‘In the last year 82% of transactions in the London market have been by overseas capital,’ said Dominic Amey (pictured), director of City investment at Colliers International. ‘What is less well known is that the top 15 transactions have been by Chinese and German investors.’
The Chinese have been ranking first with around £6 bn (€6.6 bn) invested in London so far this year, compared to £600 mln in 2010, but German investors like Deka Immobilien and Deutsche Asset Management are second with £1.3 bn, followed by other European countries with a few hundred million each. The depreciation of sterling against the euro has been a strong incentive to invest, delegates heard.
‘German investors, including family offices, are very active in the UK, and I would not have expected that six months ago,’ said Michael Walton, chief executive, Rynda Property Investors. ‘Brexit is a real risk for investment, but smaller operators like us can take advantage of a certain paralysis in the market.’
US investors, who had long been a regular feature in the UK market with around £3 bn a year, have this year been 'almost non-existent, below the £500 mln mark,’ said Amey. ‘They cannot achieve the returns they want, certainly not in London.’
The Brexit effect is also a factor. ‘The UK is perceived as higher risk now,’ said Damian Harrington, director, head of EMEA research at Colliers International. ‘It’s the country that has depreciated the most in terms of risk profile, but it is still performing well in a European context.’
The market is proving to be resilient, considering the challenges, said Amey: ‘In 2016/17 London has attracted £27 bn in investments. Paris is next with £19 bn, exactly the level that the big German cities together are at, so by comparison we are holding up well.’
Amey also gives short shrift to gloomy predictions of an exodus of bankers and companies from the City following Brexit: ‘There will be relocations, undoubtedly, but you have to keep it in perspective,’ he said. ‘Even if 10 or 13,000 people leave, I do not see an oversupply situation in the City or a disastrous scenario for London.’
The City has evolved from the purely financial sector-focused centre it was, he explained. ‘There has been huge and extraordinary change since 2010: in this time the banking sector has grown by 25,000 people but the tech sector, professional services and media have grown by 150,000 employees. In such a short space of time they now require 15 mln square feet.’
