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

Weak pound outweighs political uncertainty for investors

TRD 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

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

An example of roll-off waste management (Credit: YouTube, iStock)

Big building owners prevent city from dumping container-pickup in trash-collection reform

Real estate scandal rocks the Vatican

“I can talk about erections all day”: NAR tech consultant’s bizarre fireside chat

From left: 305 East 47th Street and 286 River Avenue (Credit: Google Maps)

Here’s what the $10M-$30M NYC investment sales market looked like last week

Clockwise from top left: 2-34 Beach 102nd Street in Far Rockaway, 175 Canal Street West in Mott Haven, 102 Fulton Street, and 71 Smith Street in Boerum Hill (Credit: Google Maps and StreetEasy)

Here’s what the $10M-$30M NYC investment sales market looked like last week

Council member Vanessa Gibson (Credit: New York City Council)

Commercial landlords face new fines as City Council passes anti-harassment bill

As House begins impeachment inquiry, here’s what we know about Trump’s Ukraine-real estate ties