Investors still snapping up central London offices

February 6th, 2013 Category: Building Management

Demand for offices in central London is continuing to hold up, a new report has revealed.

According to figures from Knight Frank, total investment turnover in the heart of the capital rose from £9.6 billion in 2011 to £13.8 billion last year.

This meant that the vacancy rate in central London fell from 7.3 per cent to 7.2 per cent during this period.

The upturn is particularly notable given the economic circumstances in Britain at the time, with a drop in gross domestic product in the final quarter of 2012 putting the country on course for a triple-dip recession.

John Snow, head of central London offices at Knight Frank, believes this demonstrates how London's reputation as a "resilient property market" is deserved.

"The investment market remains popular with overseas investors, who are now spending more than double the amount on London offices than they did ten years ago," he commented.

Stephen Clifton, an Investment Partner at Knight Frank, has put this trend down partly to the weakening value of the pound against other major currencies.

This, he said, means it is becoming increasingly logical for foreign investors to purchase in London, particularly as it offers relatively attractive prices when compared with their home markets.

For instance, Mr Clifton said prime yields on offices in the West End are now four per cent, while they come to five per cent in the City. By contrast, prime yields in Hong Kong currently stand at about three per cent.

He went on to note that while investors were primarily focused on safer assets throughout 2012, this is starting to change.

"In 2013 I expect to see investors taking on more risk, including looking at development sites in order to ride the global economic recovery," Mr Clifton commented.

Overseas investors snapped up £9.6 billion worth of office space in central London last year, which accounted for almost three-quarters of activity in the market throughout this period. 2012 also saw the amount invested by foreign buyers increase to record levels.