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Foreign property investors gobble up London commercial real estate

Some £1.602 billion was invested in central London’s main West End and City and Docklands markets, an increase of over 12% on the second quarter of the year, the latest report from Cushman & Wakefield shows.

It is the first time the capital has delivered two quarters of consecutive growth since 2007.
The dominant buyers continue to be overseas investors with more than 70% of transactions by non UK buyers.

They are attracted by the weak pound and the very attractive returns achievable resulting from London’s relatively rapid price correction compared to other markets across the world.

The West End again showed the biggest increase in activity with £909 million invested, an increase of 24% on the second quarter of the year and up 32% on the same time last year.

There was no sign of the traditional summer break with vendors keen to take advantage of the purchaser demand which has been building up throughout 2009, the report says.

Notable deals included the purchase of Portman House for £155 million by the Libyan Investment Authority and Telstar House in Paddington was purchased by Henderson from the Prudential for £74.5 million.

Clive Bull, head of central London investment, at Cushman & Wakefield said that the rest of 2009 is likely to be characterised by yields coming under more pressure as there is a relative lack of supply to satisfy investor demand.

‘Most of the UK institutions and REITs seem to have reached the end of their immediate selling requirements and there is limited evidence of the banks releasing the much heralded stream of distressed assets,’ he said.

‘Whilst there undoubtedly remain difficulties in both the economy and the occupational leasing markets, investors are looking beyond the immediate problems and trying to position themselves in the market to reap benefit from the anticipated recovery,’ he added.

Overall the report concludes that the outlook remains very positive with an increasing number of international and UK investors coming to the market.