The office space market in central London enjoyed a particularly strong year for investment in 2012, characterised by a record number of foreign investment deals and at the end of January, it was revealed that activity in the central London office space sector had returned to pre-crisis levels. As global demand for workspaces in the UK capital continued to rise, 2012 saw a total of £14 billion invested in commercial London properties; two thirds of this total can be attributed to foreign investors.
Buyers from China, Korea, Malaysia and the Middle East all showed a great interest in the central London office market; during 2012, a total of £7.2 billion was invested in the Square Mile alone. This is more than twice the amount that was invested during 2011.
The most notable commercial property deals in central London last year included:
– The purchase of the Devonshire Square office complex by Blackstone (£340 million)
– The purchase of six offices from listed UK property firm Hammerson by Brookfield (£518 million)
– The purchase of Tower 42 by South African business magnate Nathan Kirsh (£282.5 million)
From East to West
According to a recently published study from property consultancy DTZ, the West End of central London has also overtaken Hong Kong as the most expensive location for office space rentals worldwide. The global survey covered a total of 126 business districts in 49 countries, and ranked them according to cost per workstation. So, why have central London’s office rental rates surpassed those of Hong Kong?
More tenants left Hong Kong’s costly central business district in favour of more affordable areas like Kowloon East and Hysan Place during 2012; this caused rental rates in central Hong Kong to drop by a full 12%, making it the world’s second-most expensive office rental location as the West End reclaimed its former title. Geneva, Tokyo and Zurich have been ranked in third, fourth and fifth place respectively. On a global level, the survey also revealed that rental rates for Grade A offices around the world increased by an average of 1% during the past year.
UK real estate specialists say that central London’s popularity as a workspace location is due to the city’s political stability, tax-efficient market and long-term income stream offerings. Investments in central London offices during 2012 reached the third-highest recorded level after 2006 and 2007, and demand shows no sign of slowing anytime soon.