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London Real Estate: Still as Attractive as Ever?

 4 min read / 

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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Brexit

Brexit Deal Will Not Stop RBS Relocation Plans

 2 min read / 

RBS

The Story

Today’s Brexit deal has failed to change the company’s decision to relocate its trading hub to the EU, says RBS CEO Ross McEwan.

“Businesses like ours have to move forward as though we are not going to get any form of deal that would good for banking.”

Ross McEwan, Royal Bank of Scotland CEO

McEwan claims the company needs to “get in a position of having certain operations so that we can look after customers no matter what happens.” While he thought clarity over the Brexit transitional agreement might slow the bank’s relocation plans, this would have to come soon to have an impact on RBS’ decision.

Why It’s Important

McEwan has previously said the company would enact relocation plans by the end of March 2018, a year before Britain’s scheduled exit from the EU, if it was not clear whether the country would remain a part of the single market. While the deal struck today will allow negotiations to move onto the topic of trade, Britain’s access to the single market is still to be negotiated. RBS serves 250 corporations in continental Europe and has numerous British clients dependent on the lender’s ability to access markets across Europe.

Having a contingency plan for Britain not gaining access to the single market is wholly sensible from RBS’ perspective. However, McEwan’s comments are likely aimed to pressure the government into speeding up negotiations. RBS’ plan to relocate are not new, and the comments could be an attempt to emphasis their threat of leaving Britain. This will put May’s government under pressure to get the trade negotiations moving swiftly.

Keep reading |  2 min read

Brexit

Brexit Deal Gives Trade Talks the Go-ahead

 2 min read / 

Brexit Deal

The Story

The UK has reached a deal on three contentious issues which have prevented negotiations moving on to trade. The deal ensures no “hard border” between Northern Ireland and the Republic of Ireland, that the rights of EU and UK citizens be protected irrespective of whether they live in the UK or EU post-Brexit and commits the UK to a divorce bill settlement estimated to cost between £35bn and £39bn. EU Commission President Jean-Claude Juncker called the deal “the breakthrough we needed.”

Why It’s Important

“Theresa May has achieved what she wanted – the green light to move on,” said the BBC’s Political Editor Laura Kuenssberg. Britain plans to leave the EU at the end of March 2019, yet trade has not been discussed. May will now be able to negotiate on trade and a transition deal, providing businesses with greater clarity over the regulation. However, the entire basis for UK-EU relations is still to be discussed.

“We all know that breaking up is hard but breaking up and building a new relation is much harder.”

European Council President Donald Tusk

The EU plan to offer Britain a Canada-style trade deal, which would impose new tariffs on trade, a document leaked last month revealed. Trade negotiations are expected to be tough and could take several years. The importance of reaching a clear transitionary framework will be vital for businesses, and a lack of clarity may deter businesses from investing in the UK.

Keep reading |  2 min read

Brexit

Why Facebook Is Not Worried About Brexit

 2 min read / 

Facebook Brexit

The Story

Facebook will open a new London office in 2018, creating 800 jobs. The decision comes amid fears that Brexit will leave businesses uncertain about the future of UK-EU trade. Deutsche Bank warned earlier this year that as many as 4,000 UK jobs could be relocated to Frankfurt due to uncertainty for the financial industry. Goldman Sachs and Microsoft have expressed concerns about the lack of clarity post-Brexit. So why is the social media giant committing to London during a time of mass uncertainty?

Why It’s Important

Three months after the Brexit vote, Apple announced plans to build a £9bn “Apple campus” in London, while back in June, Google submitted plans for a new London HQ. Concerns about Brexit for businesses stem from the potential for trade tariffs and disruption to existing UK-EU supply chains. However, these problems are unlikely to significantly impact these tech companies, whose London operations are focused on design and marketing.

Leaving the European Single Market is unlikely to have a significant effect on the R&D side of their business but it could prevent these companies from hiring highly-skilled foreign workers. Despite these concerns, Apple plans to relocate 1,400 staff to its “Apple campus” when construction is completed in 2021. Amazon also plans to hire 5,000 new staff in London. Investments by these tech giants signal their commitment to the capital.

Keep reading |  2 min read

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