Overseas appetites drive big London deals past 2011 total

Overseas buyers chase trophy central London assets worth £100m-plus

International investors’ appetite for large central London buildings looks set to drive up total investment volumes in the capital this year.

Last year just over £6bn was spent on buildings with a price tag above £100m, but £6.7bn has already been spent so far in 2012, with three months of the year remaining. According to BNP Paribas Real Estate, there were 29 sales of large assets last year, while there have already been 32 such deals in 2012.

Of the 20 largest deals this year, only one was not bought by an overseas investor and  that was outside the city core: Stanhope’s acquisition of the BBC site in west London. Sellers were more mixed than buyers, including UK property companies and UK institutions, as well as overseas investors.

Paul Abrey, director of investment at BNP Paribas, said: “Continued demand  for good-quality, large assets demonstrated the drivers behind international investment in London: protection of wealth, in a market that has the attractions of depth; and transparency in assets that boast the fundamen-tals of secure, long to medium-term income streams.

“These trophy buildings also have the qualities necessary to take advantage of rental growth.” Paris has been experiencing  a similar trend, according to Savills. The agent found that 31 deals exceeding €100m were completed between Q1 and Q3 2012, compared with 21 in the same period in 2011.

Middle Eastern sovereign wealth funds and Qatari buyers have been the leading investors. The Qatar Investment Authority paid €500m for 50-52 Champs Élysées, while investment by  the Chinese, Dutch, Swedish and Swiss has grown. German investment has halved, however.

London deal volumes remain below the 2006-2007 market peak. In the record year, 2007, 50 £100m-plus buildings were sold for £12.6bn. The difference then, Abrey said, was most deals were financed with debt.

European investment volumes in the year to date are down to €75bn, compared to last year’s €85bn for the same Q1-Q3 period, according to figures from Jones Lang LaSalle.