North America accounted for the largest growing foreign investor region in the Capital’s commercial property market, as Asia, the current largest investor – demonstrated a decline in investment for the first time in nearly three years following quarter-by-quarter analysis.
Datscha, the proptech platform which shows ultimate ownership of commercial properties, revealed the data in their transactions module which indicates deals worth more than £3m each – those deemed of economic significance to the market in the period January 2017 to date.
North America dominates Central London
During 2019 in Central London, investors from North America were the highest in terms of percentage share of overseas investment, totalling almost £1.7bn (driven by the Citigroup deal in Canary Wharf). Investment volumes have been rising in Central London from this region since 2017 – up 31% year on year and accounting for a 22% share of all CL investment in H1 2019 (compared to a 12% share in H1 last year and a 6% share in H1 2017).
With the exception of the North America region, investment dropped across all regions during H1 2019 compared to the previous year (North American investment totalled £2.1bn in H1 2019). US Citigroup acquired their headquarters in Canary Wharf for £1.2bn which has helped increase capital flows from the Americas region. Other notable deals include the sale of a 458-bedroom purpose-built student accommodation block in Shoreditch for £160m and a forward funded residential development in Walthamstow for £105.5m
Decline of APAC, EMEA and domestic investment
Despite a 40% increase in investment from the Americas region, domestic capital still dominates London – 37% of all investment was from UK buyers; second was APAC capital at 27% (although the amount of money invested this year to date v the same period last year for APAC actually fell by 29% (to £3.37bn). Investment from EMEA was two thirds lower than the same period last year and only represented 7% of total investment volumes 2019 year to date
Total volumes down in 2019
Total volumes in 2019 have declined by 28% compared with the same period last year. This is being driven by both cautious investors awaiting the result of Brexit negotiations but also a lack of available stock.
Datscha’s analysis has uncovered the ultimate owners, often hidden in larger portfolio deals to reveal buyer origins and thus demonstrate the trend. These portfolio deals have been matched with the latest Land Registry data – using the period from January 2017 to date.
London’s global appeal
Lesley Males, Datscha’s Head of Research, commented: “The significance of this research lies in the understanding of London’s global appeal and resilience right throughout the three-year long period of political instability in which we find ourselves.
Rise of North American investors
“As Sterling took a tumble in the summer of 2016, a number of APAC investors took the opportunity to secure a stakehold in London, yet this trend seems to be slowing as North American investors have stepped up their interest. Furthermore, North American commercial property investors have also increased their interest in the UK regions during the time under analysis.”
Rise of the hotel sector
“Investment in the hotel sector increased during the first half of 2019 compared to the same period last year by 19% – largely driven by the sale of the Grange Hotel portfolio for £1bn. All hotels were located in London.”
APAC still rules the City
APAC investment still leads in the City. Almost half (48%) of all investment in the City was from the region, totalling £1.38bn but most was driven by the completion of the sale and leaseback of the Goldman Sachs HQ for £1.185bn which was announced last year but completed Q1 this year to Lasalle on behalf of the Korean National Pension Service. Compared with the same period last year, volumes were down by 51%, a contrast to the 75% increase in H1 2018 (compared with 2017).