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London’s real estate market is ready to spring back into life

Vanessa Muscara, Director, Head of Research & Strategy, Europa Capital

London is in limbo but the real estate market is ready to spring back into life, delegates heard at Real Asset Media’s Global Outlook 2021 – Europe & UK investment briefing, which was held online recently.

The third lockdown at the beginning of the year has had a dampening effect on the market, but there are high hopes that the successful vaccination programme will lead to a bounce back in H2.

‘London always reinvents itself, changing occupier profiles,’ said Vanessa Muscarà, Director, Head of Research & Strategy, Europa Capital. ‘It is driven by fundamentals and global relative value’.

Tech and media companies have more than filled the gap left by some banks downsizing or relocating to mainland Europe because of Brexit.

‘Financial services will continue to be important, of course, but London is no longer all about banks’, said Jamie Olley, Principal, Capital Markets Group, Avison Young. ‘Since the GFC we’ve seen the financial sector reducing demand as an occupier and headcount reductions have been going on for a while’.

The mix of occupiers has changed, he said: ‘There are less banks but more professional services, including some very large US law firms, more tech, media, education and life sciences’.

Deutsche Bank used to have a 2 million sq.ft campus, but now it has downsized to a 750,000 sq.ft office. Amazon, on the other hand, ‘didn’t have a footprint at all but now have twice as much space as DB in interesting locations all over London’.

The UK’s deal with the EU did not include financial services, but it has provided much-needed certainty to international investors, giving them another reason to commit.

‘There’s so much pent-up demand and there’s always capital looking at London’, said Olley. ‘Last year investments were £9 billion, down from 13 billion in 2019 which is a pretty good figure, considering’.

H1 is expected to be slow and sluggish, with little stock coming to market as investors wait for pandemic restrictions to end. H2 could be a very different story.

‘It is encouraging to see so many investors looking at value-add and short-term opportunities’, said Olley. ‘There’s also demand for development sites and good locations are seeing very strong demand’.

‘London always reinvents itself, changing occupier profiles,’ said Vanessa Muscarà, Director, Head of Research & Strategy, Europa Capital. ‘It is driven by fundamentals and global relative value’.

Tech and media companies have more than filled the gap left by some banks downsizing or relocating to mainland Europe because of Brexit.

‘Financial services will continue to be important, of course, but London is no longer all about banks’, said Jamie Olley, Principal, Capital Markets Group, Avison Young. ‘Since the GFC we’ve seen the financial sector reducing demand as an occupier and headcount reductions have been going on for a while’.

The mix of occupiers has changed, he said: ‘There are less banks but more professional services, including some very large US law firms, more tech, media, education and life sciences’.

Deutsche Bank used to have a 2 million sq.ft campus, but now it has downsized to a 750,000 sq.ft office. Amazon, on the other hand, ‘didn’t have a footprint at all but now have twice as much space as DB in interesting locations all over London’.

The UK’s deal with the EU did not include financial services, but it has provided much-needed certainty to international investors, giving them another reason to commit.

‘There’s so much pent-up demand and there’s always capital looking at London’, said Olley. ‘Last year investments were £9 billion, down from 13 billion in 2019 which is a pretty good figure, considering’.

H1 is expected to be slow and sluggish, with little stock coming to market as investors wait for pandemic restrictions to end. H2 could be a very different story.

‘It is encouraging to see so many investors looking at value-add and short-term opportunities’, said Olley. ‘There’s also demand for development sites and good locations are seeing very strong demand’.

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