Richard Cleminson is the professional services director at Kinleigh Folkard & Hayward
With the UK still technically in a recession it may surprise people to know that commercial property in London has been having a good year. According to recent research after a positive first quarter the UK commercial property market though broadly flat May remains robust, with capital growth of 0.4% and total returns of 0.7% (up from 0.1% and 0.5% in April respectively).
This strong performance from the Central London market was largely due to significant investment in the West End which experienced capital growth of 0.7%. The Central London commercial property market remains the strongest performing sub-sector in the UK.
While the Eurozone faces its on-going issues London remains a safe haven for property investors and a key destination for global capital. So far in 2012 nearly £6.3bn has transacted in Central London, 50% higher than the same period last year. It’s getting harder to buy in central London as all sorts of funds flood in. My colleague has an architect contact whose clients from Thailand, Singapore, Brazil and Russia are all desperate to buy in London.
This is clearly not the case in more regional markets which have seen a 50% decrease in transactional volumes and the concerns about weaker economic output and the consequent uncertainty about rental void rates deterring investors.
The Eurozone woes are a double edged sword for the UK. The lack of confidence is balanced by investors’ flight to quality. This is specific to London and the South East but the ripple out effect of this will be seen over the coming years.
With the Olympics upon us and on-going Jubilee celebrations we can assume that traditional investors in UK property may well take a longer than usual summer break and resume activity in the third quarter when they will also expect to have greater clarity on the economic outlook. When they return they will find commercial property in London is in demand.
