There has been a lot of talk about how Brexit will impact commercial real estate in London. GRS Group already reported that it hasn’t shied buyers away from the European metropolis.
In the first six months of 2017, commercial real estate transactions from firms, mostly based in Hong Kong, have hit $5.1 billion, according to CBRE. That has already surpassed the entirety of last year, which came in at roughly $3.5 billion.
The most major example is the acquisition of the 34-story “Walkie Talkie” office building, as well as another skyline fixture called the “Cheesegrater.”
So why do these China-based commercial investors care about the London office market? It’s obviously performing well and is expected to have increased positive fundamentals in the future, being one of the most top-of-mind global cities.
A Colliers International statistical report on the London office-market during the second quarter said that 2.9 million square feet of absorption took place in that time period, the most since the first quarter of 2016. Meanwhile, vacancy is on the rise, though moderately. It clocked in at 5.2 percent, the first time it has risen above five percent in the last three years, and in 2016’s Q2, it was at 3.1 percent.
But at the same time, there are plenty of cranes on the London skyline, meaning that developers are enthused about the market. There is about 400,000 square feet of speculative office development reportedly taking place during the remainder of the year. Most of the demand for space is fueled by tech and media companies, which is not dissimilar to other significant urban metro areas.
There is no doubt that London commercial real estate demand, especially in the office arena, will happen despite whatever happens with Brexit. It’s been one of the most important cities in the world for several centuries, which isn’t likely to change in the next several decades. The investors in China understand that, and find it a safe bet.