Dubai
Stop using “Brexit” and “fallout” in the same breath … at least when the conversation is about global investor interest in the UK real estate marketplace. The numbers certainly seem to prove so.
In commercial property transactions. “turnover for London was approximately £17 billion, the third highest on record” in 2017, according to Chris Brett, Head of International Capital Markets at the consultancy CBRE. The (overall) UK turnover (for commercial) was in excess of £50 billion (Dh250 billion).
“For residential, the year was mixed — an ongoing under supply of housing continues to be the case and the PRS (private rented sector) market and BTR (build-to-rent) gather momentum all the time.”
The globe-straddling mega investment funds who were supposed to stay away after Brexit also stayed put. In fact, Norway’s wealth fund — which manages more than $1 trillion (Dh3.67 trillion) — actually raised its exposure in London over the rival claims from New York.
. Middle East investors were also doing their bit to keep the London/UK property market flame burning bright. CBRE reckons these investments totalled a handy £1.2 billion in commercial real estate. “Even in the residential sector, Middle East activity remains keen on London,” Brett added. “They remain (net) buyers in London.” A point that was voiced for by the developer behind the £9 billion Battersea Power Station makeover. “UK buyers have been the predominant purchasers; however there has been a lot of interest from the Middle East given London’s ongoing appeal,” said a spokesperson at the operating company.
“Many buyers from the region have purchased a home in Circus West Village as their main London home. Others have children at university, so have bought a home here for them to live in while they are studying.
“Some have also bought off-plan in the third phase and are attracted to the idea of owning a home in Frank Gehry’s only residential building in the UK.”
Plus, when Apple Inc decides to base its new 500,000 square feet UK campus there (from 2021), it is a given that Battersea will not have to exert itself to market itself as a location.
The developer is now focused on the third phase of sales, with prices from £1.33 million for a two-bedroom apartment in Prospect Place or £2 million for a three-bed at Battersea Roof Gardens. Another phase involving 865 units is nearly sold out. So are most of the 253 apartments inside the Power Station, which start at £2.75 million.
In all, there will be over 4,300 new homes. Over 1,000 residents have moved into the first homes handed over. Construction at the site began in 2013 and the whole 42-acre regeneration project is due for completion in 2028.
But can London realty retain its attractions through this year as well? On the political front, it is anyone’s guess how the separation with the EU will play out. And recent numbers suggest the UK economy’s growth rate will slip.
Also, one major factor post-Brexit was the weakened pound, but a recent return to strength is eroding some of the currency-based advantage. So is any weakness in the dollar, which immediately tells on foreign buyer interests.
But Brett suggests the sort of buyer wanting to take a London property exposure will not be overawed by mere currency fluctuations. “London, on a relative basis, does offer investors attractive returns,” he added. “However, the biggest driver for overseas investors was London’s status as a global gateway market and its positioning on the world stage — this remains undoubted.”
“There is £39 billion in demand for London commercial (real estate) today and as a city it remains a key global target. Central London retail is also in high demand from Middle East investors.
“Some assets have taken longer to sell and some have been withdrawn, but overall the market remains resolute. Whilst significant uncertainties remain — from reduced consumer spending to changes to US interest rates to the reality of Brexit — the relative value of sterling coupled with London’s safe haven status continue to pique overseas interest. As a result, we anticipate robust investment volumes in 2018.”
Apple picks up quite a piece of the Battersea
The US tech giant will occupy 500,000 square feet across six storeys of the Battersea Power Station building, which will be Apple’s new UK campus from 20 “A further 40,000 square feet of office space was recently made available and is being marketed now,” said a spokesperson with the UK developer. “It would be suitable for a variety of commercial occupiers including co-working. There will be over 80 shops as well as a 2,000-seater events venue. The first retail tenants are expected to be announced later this year.”
