London's Real Estate Market Continues To See Strong Levels Of Demand From Investors

London, 7 October 2013 – UK and overseas buyers continue to invest strongly in London as £4.7 billion worth of transactions occurred during the third quarter of 2013. The heightened flow of capital made it the strongest quarter since the peak of the market in 2007 (Q3 £5.59 billion) and the fourth strongest quarter for investment on record, according to the latest research from global property advisor CBRE.

There remains a high level of interest in the London property market from overseas investors, but it was the purchases from domestic buyers, particularly from property companies and institutions, that really stood out over the quarter.

Domestic capital alone accounted for 52% (£2.4bn) of market share in terms of investment volumes in London over the third quarter. This compares to 24% (£1bn) in Q2 and 37% (£1bn) in Q1, it’s also far in excess of the year to date average of 38%.

Foreign investment continued to be a significant factor in the market, as the combined purchases from Asian investors meant they made up the second highest market share percentage, with six of the top ten buyers coming from the region, totalling 22% (£1b). German investors, albeit from a single transaction, accounted for the third highest percentage at 13% (£610 million). Middle East purchasers also continued the trend of buying in London, making up 4% (£191million).

Key transactions over the quarter included; the high profile purchase of Paddington Central by UK REIT British Land, UK institution Legal & General’s purchase of 70 Gracechurch Street, the purchase of Shell-Mex House on the Strand by Sirosa, Korean buyers SRA Asset Management’s purchase of 30 Gresham Street and Chinese investors Ping An’s entry into London with the purchase of the famous Lloyd’s building.

Mike Edwards, Executive Director, Central London, commented:

“Unsurprisingly, the quarter witnessed a significant amount of investment from Asian buyers, with Koreans and Chinese buyers being very active over the period. However, what has really stood out has been the increased activity from domestic buyers. It’s clear that both UK property companies and institutional investors have been more active over the last quarter and are coming back into the fold with increasing ticket sizes. What’s made the difference is primarily renewed confidence in the leasing markets and resultant growth prospects, so now even short incomes and refurbishment/development opportunities are keenly fought over.

“But the import of foreign capital is not abating - we expect foreign capital to continue to target London, particularly from sources such as Chinese insurance funds with deep pockets and who are seeking diversification. The net result of increasing domestic and overseas demand is, of course, downward pressure on yields, particularly for prime assets.”