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Strongest year on record for London, with living space driving growth

Download our full 2018/19 UK Capital Markets Review & Outlook here.

Investment hit £30.9bn across Greater London in 2018, the highest total ever seen in the Capital.  This represents a 13% increase on the 2017 figure of £27.3bn and is 34% ahead of the 10-year average of £23.0bn.

This growth has been largely driven by the emerging living sectors, particularly the private rented sector (PRS) and student housing.  Overall alternatives investment was £3.7bn, 49% higher than the previous record of £2.5bn in 2015.  Of this total, £3.3bn was invested in living sectors including £2.4bn in the rapidly growing PRS market, the first time the sector had reached even £1bn in London.  A number of major living space portfolios were traded in 2018, the largest deal being Allianz’ £617.5m purchase of the Chapter Living student housing portfolio.  This was closely followed by Oxford Properties’ £600m acquisition of the Get Living portfolio, one of eight PRS transactions exceeding £100m in London last year.

While recent growth has come from living sectors, the core of the market remains strong.  The largest of these core sectors, the Central London office market saw £17.9bn of investment in 2018, a slight increase on the already strong 2017 levels, and 21% ahead of the long-term average.  International investors accounted for 75% of Central London office acquisitions in 2018, with Asia-Pacific buyers in particular continuing to target the sector.  South Korean investors added to this weight of money in 2018, and the National Pension Service were responsible for the largest transaction of the year, purchasing Goldman Sachs’ new Midtown HQ at Plumtree Court for £1.2bn.

Across the whole London market, overseas buyers were responsible for 70% of purchases.  This includes the biggest deal of the year at Battersea Power Station, as the joint venture between PNB and ENF of Malaysia acquired the commercial properties in Phase II of the iconic mixed-use development for £1.6bn.

Compared to 2017 when private Hong Kong buyers dominated, there was a far greater diversity in the types and sources of capital arriving in London last year, offering an encouraging signal as to the health of the market.

 

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