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Overseas buyers boost commercial property investment in central London

This represents more than a 50% increase on the £6 billion total for 2011, according to the quarter four figures from Jones Lang LaSalle.

It says that with the final figure likely to be close to £10 billion, the sector is on track for the highest figure since the financial crisis in London and the second highest year ever after the £10.6 billion achieved in 2006.

The West End has also been busy, with turnover for 2102 at £5.9 billion, some 25% above the £4.7 billion total for the whole of 2011. The firm forecasts that year end volumes for the West End will be very close to the previous peak of £6.3 billion in 2006.

‘Activity in the second half of 2012 has been strong across central London, with the market continuing to witness high demand from global investors. Based on turnover over the year to date, 80% of City transactions and 65% of West End transactions have been undertaken by overseas buyers,’ said Damian Corbett, head of London capital markets at Jones Lang LaSalle.
 
‘The central London investment market continues to offer true global appeal with investors from North America, South America, Europe and Asia Pacific displacing domestic players. Looking to 2013, barring any global economic shocks, we predict prime yields could well be under pressure as a result of a potential shortage of suitable stock and a growing list of new market entrants joining existing active investors,’ he explained.

‘We are confident that 2012 is on target to be the second highest year on record for central London in terms of the total value of transactions, with investors keen to close deals before year end,’ he added.

In the City leasing market, active demand remains relatively constrained, however overall requirements have remained steady over the past year at circa 10 million square feet, although this total reflects a number of new instructions as well as a healthy level of take-up. Annual leasing volumes in the City, at 3.8 million square feet are 12% higher than during the previous 12 months. As a result of a number of deals which closed in the final two weeks, the firm forecasts that the final year end total will be around 20% higher than in 2011.

‘In the City, the second half of 2012 has proven that for the right stock in the right location transaction activity remains encouraging, with healthy headline rents being achieved, particularly in EC3. We are also beginning to see certain occupiers that have been in market for some time making decisions on their preferred real estate. The market temperature does seem to be rising slightly,’ said Neil Prime, head of office agency Jones Lang LaSalle.
 
‘The key to 2013’s market performance will be occupier confidence and for that to begin to return on a wider scale we will require a period of relative economic stability. Assuming that does occur we expect prime rents in the city core to remain stable during early 2013 with growth anticipated toward the second half of next year,’ he pointed out.

‘The diversity of London’s West End remains its key strength, although the year has been more challenging for the core Mayfair and St James markets, which rely more on financial services. However rents have held and demand is likely to strengthen over the year. We expect rental growth over 2013, with take up in those core markets driven by corporate and M&A activity,’ he added.

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