Hodes Weill & Associates has said that many investors in London real estate view Brexit as a mere “speed bump” and that it will remain a top global destination for institutional capital over the next year as the U.K. gears up to leave the European Union.
According to the global capital advisory firm, London is still a firm favorite with investors for three main reasons: it remains the deepest and most transparent market in Europe; it has a diversified economy with a strong technology element and is not just reliant on its financial market; and Asian investors now see it as a long-term safe haven. In a paper on its Top 10 Observations for 2018, Hodes Weill also highlighted how institutions are benefiting from the weakness of the pound, which has allowed them to back some real estate managers who are pursuing “buy, fix and sell” value-add strategies in assets located on the fringe of the City of London.
In addition, the U.K. capital is set to benefit from CrossRail — due to open in late 2018 — which will speed up travel times to Heathrow airport and connections between the East and West of the city.
“If, on June 24, 2016, Brexit plus one day, we were told that the London real estate market would top the global ‘most invested’ list for 2017, we would have been mighty skeptical,” writes Hodes Weill in its paper.
Yet, as recently reported by JLL, this was the case.
“We won’t be surprised if London remains at — or close to —the top of the most invested list again this year,” it added.
Meanwhile, research from Cushman & Wakefield has found that companies leased a record 3.7 million square feet of additional central London office space in 2017. The firm said that this was due to many expanding companies opting for additional top-up space, rather than full-scale relocations.
In a more cautionary tone on the subject of Brexit, the firm also said that tech, banking and financial services companies were most likely to take overflow or expansion space, partly because of continued uncertainty around Brexit’s implications for their long-term prospects in London.
Elaine Rossall, head of U.K. offices research & insight at Cushman & Wakefield, said: “Although occupiers are expanding and taking up more space, they are increasingly conscious of cost and keen to retain flexibility. Most Central London relocations in 2017 were either rent neutral or to a lower cost area, with a third of companies moving to a lower cost submarket. This trend has increased slightly since the EU referendum.”
