June 5, 2017    4 minute read

London Real Estate: Still As Attractive As Ever?

The Only Way Is Up    June 5, 2017    4 minute read

London Real Estate: Still As Attractive As Ever?

Fears of financial flight in London following Brexit are quickly disappearing. London’s commercial real estate market is being inundated with record levels of investment.

Banks, tech titans and corporate giants are all increasing their presence in London, with business expansion and many huge real estate deals taking place. CBRE data shows that £4.9bn of transactions took place between January and March – the highest ever for a 1st quarter in the commercial real estate market.

Tech Titan

Google has released final plans for an adventurous billion-dollar headquarters in the centre of London. This 870,000 square foot ‘landscraper’ is set to sit opposite Kings Cross station in Pancras Square. If approved, it will be as long as the Shard is tall and include all the Google staples: sleeping pods, yurt-shaped meeting rooms and 19 free restaurants. Also in the plans are ‘fields, meadows and gardens’ on the 300 metre long landscaped roof terrace, as well as an on-site bowling alley and a 25-metre swimming pool.

This may seem like a child’s fantasy to some, but it has important implications for London. This billion-dollar investment will mean that the world’s most powerful brand, valued at $109bn has chosen to expand operations in London. Current staff levels of 3000 will rise to 7000 when the project is completed.

In fact, London is in the midst of record tower construction, and a whole range of international giants are choosing to build in London. A record 455 new tall buildings are either planned or under construction in London. These include ‘The Scalpel’, being built in the City as the European Headquarters of the W.R Berkeley Corporation at the cost of £500m.

Global Investment

The Qatar Investment Authority (QAI) has also been leading post-Brexit investment into London. Earlier this year Ali Shareed Al Emadi, finance minister of Qatar, announced that the QAI would be putting a further £5bn into Britain’s infrastructure over the next five years.

The chief executive of the fund, Sheikh Abdullah bin Mohammed, added: “I am still looking, even after Brexit there will be opportunities QIA can really hunt for.” Having already invested in Canary Wharf and the Shard, this investment is likely to largely focus on new British real estate.

This combined with Deutsche Bank agreeing to a deal for a new City headquarters in 2023, adds weight to the argument that international giants still view London as a city of long-term strength – a stark contrast to fears that banks will flee the Square Mile after Brexit.

In fact, technology titans Google, Facebook, Apple and Snap are all increasing levels of investment in the UK’s capital. Furthermore, Wells Fargo, the world’s second-largest bank my market capitalisation has signed deals for a new £300m headquarters next to London Bridge.

These post-Brexit real estate investments are a huge vote of confidence into the future of London as a global financial hub. Multinationals still want to build in London.

Future Threats

However other factors are of course at play, such as the pound dropping to a 31-year low, making the UK real estate relatively cheap to invest in. Another factor is that Brexit has not really happened yet, and as such Europeans can still freely travel to and from the UK.

London is historically deemed highly attractive due to its high-quality transport links, access to European markets and world-class talent pool. These factors could be affected by the outcome of Brexit negotiations; both in the status of EU nationals in the UK and the level of freedom of movement between the UK and Europe. A hard Brexit is, therefore, a potential threat in waiting.

Strong and Stable

However, the investments described in British real estate give strong encouragement that, despite Brexit and market uncertainty, London is still a highly attractive place to invest.

Tech titans such as Google and global funds, corporations and financial service providers such as the QAI, W.R Berkeley and Deutsche Bank are all continuing to build and expand in London. These firms all have huge risk management departments and are reliant on European markets, adding to the weight of argument that London is perceived as very much open for business.

Hopefully, politics will not stop this from being the case.

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