London has retained the top spot for international real estate flows despite uncertainty surrounding the UK’s departure from the EU.
According to research published by JLL, investment in the UK capital increased by 35% to $33bn (€26.5bn) last year compared with 2016, moving it up from second place.
Los Angeles came in at second place with $23bn of transactions. New York, which held the number one spot in 2015 and 2016, slipped to third as annual investment amounted to $21bn.
In total, transaction volumes globally recorded a 6% uplift to $698bn in 2017 from 2016’s volumes of $661bn.
Richard Bloxam, the global head of capital markets at JLL, said: “It may come as a surprise that the London commercial real estate market has stood firm in the first full year after the UK’s decision to leave the EU.”
Two recent reports by real estate associations suggest a similar trend in 2018. A global investor survey by INREV, PREA and ANREV and a similar study by AFIRE both found London to be the number one target of global capital.
In 2017, a series of large property transactions in central London help restore the UK as the largest commercial real estate market in Europe.
Notable deals included the sale of the Leadenhall Building, known commonly as The Cheesegrater for £1.15bn (€1.31bn) and the record-breaking £1.3bn disposal of 20 Fenchurch Street, the London skyscraper dubbed the Walkie Talkie.
Bloxam said: “2018 will see a number of key decisions during the negotiations and will give us a much clearer picture of what the post-Brexit future will look like.”
Even with an expanding amount of capital targeting real estate, JLL believes that real estate investment volumes will be 5% to 10% lower in 2018 as the challenges of finding available assets to purchase, combined with continuing investor discipline, are likely to constrain growth in volumes.
Similarly, IPE Real Assets’ reported real estate 2018 outlook signals a year of moderation for investors.
“This evolution in capital markets will accelerate the drive for investors to consider new strategies with a greater focus on entity-level deals, recapitalisations, refinancing and broader debt strategies, as well as a wider investment universe of real estate sectors and cities,” JLL said.