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The demand for housing in Central London is getting greater and greater and many foreign investors feel that having a prestigious residential asset in London is vital. The number of overseas businesses and funds investing in the London commercial property market has taken off in the past year and a half. Many foreign investors enjoy the stable yields of owning prime commercial office space coupled with the benefits of a residential address in the heart of London. Against the backdrop of the Euro zone crisis and with the persistent economic uncertainty of Europe many investors from abroad see London as a property safe haven.
And London needs this foreign investment. Last year 60% of investment into London came from abroad. The combination of huge foreign investment and European uncertainty has kept the prices buoyant, although this kind of investment has always had its place in the capital.
The latest driving force of international interest derives from South East Asian investment, in particular Malaysia and Singapore. The latest development project involving Singapore is part of the Land Securities regeneration plan, King’s Gate, which is a huge regeneration of up to £2 billion in the Victoria area of Central London. The project aims to introduce 600 new high-end, luxury residential homes into the market by 2014 whilst the developers also begin their plans for the Victoria Circle project, a new mixed-used development boosting the volume of office, retail and residential space in the area. These two new grand projects will see the British property powerhouse, Land Securities, working side-by-side with South East Asian investors.
Victoria presents the perfect location for this new residential regeneration. Recently the precedent has been set in Fulham, Chelsea, Holland Park, Hammersmith, Kensington and Victoria itself for office space to be turned into residential. Landlords are repeatedly applying for change of use for their properties within these locations as residential values continue to soar. SW1 at present is seeing significant and consistent residential take-up from international investors as they perceive this Central London location as the prime area for owning a residential property. Tom Lax, a senior agent from Morgan Pryce, believes this is due to the fact that “Victoria is such an easy place for foreigners to get to. The transport links from one of London’s largest train stations means that visitors from abroad can come and go as they please from their new residential homes.”
However this will have a dramatic affect on office rents in the area. At present rents for offices in Fulham, Chelsea, Holland Park, Hammersmith, Kensington and Victoria range from £20 per square foot up to £40 per square foot. Whilst demand for office space in this area remains intense, there is a noticeable lack of supply – which will deepen – as the value for residential outweighs the value for offices and the supply of the latter continues to drop.
Morgan Pryce is a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.