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London is still out-performing other European capital Cities such as Paris and Munich based on direct investment purchases of office buildings.
Already this year over £6billion has changed hands in Central London with last year’s level of £10billion set to be beaten.
The list of buyers makes interesting reading with no significant trend for a dominant nationality. In the past, London has been the victim of investment bubbles and stories of great profits and clever deal making being eroded by very poor returns, often lead by funds and developers chasing the market and simply losing grip of sensible fundamentals.
The last bubble to burst tied in with the credit crunch and the economic slowdown in 2007. The market was overheated by eager UK based funds and US aggressive growth funds. It could simply not coupe when buildings stopped letting and rents went the wrong way, with rent free periods and voids increasing.
Whether today is the start of the next bubble is possible, but still difficult to predict. Over 40 countries have been active in buying some of London’s landmark buildings and there is more to come from them and others in an increasingly competitive buying market.
Notable deals in the financial district include:
-NPS (Korean Pension Fund) purchase of 63 St Marys Axe for £27million.
-Aviva Tower, EC3 purchased at £288 million by an Indonesian Investor -River Court occupied by Goldman Sachs, bought by a Hong Kong based buyer for £280 million.
Morgan Pryce believe that value can still be found in Central London but as the weak pounds continues to favour overseas buyers in bidding wars UK investors need to understand what they are buying, now more than ever.