Feb 25, 2011

London drives recovery of commercial property sector in the UK

So, things are looking up according to recent reports. Last week RICS reported that there was a marked increase in the number of surveyors who felt that the current quarter would see an improvement in lettings and sales figures. One of the most eye-catching moves in the market came with the announcement from Citibank was to invest over £300 million in the British property market, mainly on behalf of Asian and African investors.

This is good news, but it is typical of the lumpy nature of the market in that when the announcement came out it referred to the British market, but in reality it meant London. The capital’s commercial property market has seen a surge in international investment in the past few years thanks to the ongoing weakness of the pound and restricted supply. That is why the value of central London offices rose by 21 per cent during 2010 and why many of London's landmark buildings are now owned by foreign investors.

It is also evident in the increasing returns on commercial property being enjoyed by investors in the UK. According to IPD’s latest quarterly index, investors saw a 15.2 per cent return on UK commercial property in 2010 driven largely by the robust performance of central London office space. But it was Central London offices that were the main drivers, with City offices yielding a 23.9 per cent return and West End offices at 23.1 per cent. The London commercial property market has outperformed the rest of the UK for the last five quarters.


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