As Brexit nears, London tops Manhattan as world’s most active office market

Weak pound outweighs political uncertainty for investors

New York /
Feb.February 06, 2019 01:00 PM

London (top) and Manhattan (Credit: iStock and Pixabay)

Despite Brexit, or because of it?

Investment in London’s commercial real estate stayed strong in 2018, with a total deal volume of $21 billion pushing London ahead of Manhattan to the top spot worldwide, according to Knight Frank’s 2019 London Report.

A weak pound and enduring demand for London office space appear to have outweighed concerns over the U.K.’s calamitous exit from the European Union next month. The pound’s value has fallen 13 percent against the dollar since 2016’s Brexit referendum.

“A lot of these investors are looking for yield, and Brexit is giving them that,” Knight Frank’s Nick Braybrook told Bloomberg. “If it weren’t for Brexit, there is no reason why London yields wouldn’t be as low as Paris and Berlin.”

Although total investment decreased slightly from a year earlier, the average deal size in 2018 was a record $106 million.

With over $4.5 billion in office deals, mainland China and Hong Kong represented the largest source of foreign investment, despite a 51 percent decline from 2017. Foreign real estate investment from China was in retreat worldwide in 2018.

Meanwhile, South Korean investment in London offices grew eight-fold to over $3.3 billion, slightly less than domestic investment from the U.K. itself. Nearly half of that sum came from Goldman Sachs’ sale and leaseback of its new London headquarters to Korea’s National Pension Service, the second-largest deal ever for an office building in London.

Korean firm Hana Financial Group also dished out about $240 million for London’s landmarked One Poultry Building, a building fully occupied by WeWork. That deal closed in December.

Though Brexit may not have spooked commercial investors in London, the impending divorce with the EU has also benefited other markets in Europe. Frankfurt, a likely destination for many bankers leaving London after the split, saw record-breaking commercial real estate transaction volume in 2018. [Bloomberg] — Kevin Sun


Related Articles

arrow_forward_ios
Clockwise from top left: 162 West 13th Street, 325 Avenue Y in Brooklyn, 1281 Viele Avenue in the Bronx (Credit: Google Maps)
Here’s what the $10M-$30M NYC investment sales market looked like last week
Here’s what the $10M-$30M NYC investment sales market looked like last week
Aby Rosen and 522 Fifth Avenue (Getty, Google Maps)
RFR pitches Fifth Avenue office building as “build-to-suit” corporate HQ
RFR pitches Fifth Avenue office building as “build-to-suit” corporate HQ
Nearly half of new shops in 2021 will be dollar stores. (Getty)
2021 is raining dollar stores
2021 is raining dollar stores
National chains and mom-and-pop stores are seeing increasing sales per square foot and shrinking occupancy costs (Getty)
National chains paid 93% of rent in April
National chains paid 93% of rent in April
(RIPCO, iStock)
Target, Five Below, Smashburger open in new Brooklyn shopping center
Target, Five Below, Smashburger open in new Brooklyn shopping center
Close to 80 hotels with more than 13,000 rooms plan to open in 2021. (iStock)
Big year seen for hotel openings, despite few visitors
Big year seen for hotel openings, despite few visitors
Savanna’s Christopher Schlank and Nicholas Bienstock with a rendering of 141 Willoughby Street (Savanna; SLCE Architects; Fogarty Finger Architects)
Savanna nabs $264M loan for Downtown Brooklyn office project
Savanna nabs $264M loan for Downtown Brooklyn office project
Blackstone president Jon Gray and the Blackstone headquarters at 345 Park Avenue in NYC (Getty, Google Maps)
Blackstone sets office return for some vaccinated staffers
Blackstone sets office return for some vaccinated staffers
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...