London’s position on the global property market

Between January and March this year, almost £5bn worth of commercial property transactions took place, according to CBRE. This marked the biggest quarterly total since late 2014.

Despite after almost a year of Brexit unease and the emergence of a shock, snap election and an even more unpredictable result of a hung parliament, London commercial property remains a central focus for investment.

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Whilst uncertainty has led to a temporary slowing of investment into areas outside the capital and UK commercial prices remain 23 per cent below their peak valuation in 2007, office prices in London have flourished and are 26 per cent higher, according to the IPD index.

According to the Commercial Property Lending Report, London now represents 63% of total debt secured against property, a stark contrast with the government’s objectives to promote development activity and economic growth across the entire country.

This is testament to London’s resilience, appeal and ability to adapt in the face of adversity.

In particular, we have seen an upward trend in foreign investment into the capital’s commercial sector, which shows no sign of abating.

Overseas investors have shrugged off post-Brexit and political uncertainty to take advantage of the favourable exchange rates and the momentary drops in pound value.

Last year, foreign investment accounted for 80% of the commercial transaction volume and according to figures from Davillis, buyers from Asia alone deployed $4.5bn into central London offices.

Fears of steep price drops following Brexit were also in part placated by the sale in March of London’s ‘Cheesegrater’ skyscraper, which was bought for $1.1bn by Chinese investors.

There has even been a spark of interest from investors from new areas of the globe, including Taiwan, after the Taiwanese financial regulator lifted restrictions on external monetary investment.

According to our own lending behaviour post-referendum, appetite for commercial real estate among UK investors has not seized either. Transactions from clients across the UK, for instance, have continued in abundance since the General Election was announced.

Moreover, there has been a rise in demand for short term bridging finance to cover the void left by traditional debt lenders, many of whom have restricted or paused lending facilities all together.

With this in mind, it is essential that investors explore alternative lending options if the London commercial property market is to continue to thrive.

At Reditum Capital, for instance, we lend up to 80% for assets on a 180-day valuation,

 

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