Barclay Fox's Blog

Investment in Central London has continued rise to a
stunning £14 billion in 2012 up from £9 billion the year before. This high level of interest within Central London was the main talk of the day at the real estate networking invent, MIPIM, the International Real Estate Show for Professionals which was located in Cannes on the French Riviera.

Many have asked why London has become so popular internationally and become such a global safe haven.  The Mayor of London, Boris Johnson believed the capital benefitted from some fundamental factors such as its, timezone, national language, constantly improving transport network as well as a young and growing population. London appears to be preferred over all other European cities and as money is becoming that much more global it appears London will benefit from new Chinese, Middle Eastern and American money.

As London is one of the global centres many are looking to obtain office space in London. This includes major global companies such as Google with their £1 billion development of their headquarters at Kings Cross to much smaller companies all looking to work within London.

Those looking to rent in the West End must now be prepared to pay 2007 rents with Mayfair being up to £120 per square foot. The rest of the West End may not be so extreme but secondary space whether renting in Noho or Marylebone will still easily reach £40 per square foot.

This lack of supply has made commercial property investment so appealing with potential high rents providing high returns. This high level of demand has prompted a series of new developments including 20 Fenchurch Street (Walkie-Talkie) & 122 Leadenhall Street (Cheese Grater) in The City, Silicon Roundabout in Shoreditch and The Shard project down in London Bridge.

Despite the high number of large development projects across London the amount of investment opportunities is still failing to satisfy the high demand. It is now incredibly hard to find available freeholds within Central London and as a result investors are now taking higher risks.

“The weight of foreign money has led to lowering of yields in the market with further rapid growth anticipated to continue” says Fraser Williams, director at Barclay Fox. “These signs of growth show signs that the London market is active again with rents returning back to do 2007 levels.”

Central London is continuing to benefit from further development whether it is the improvement into London transport such as upgrade of London Bridge national rail station. Improved accessibility will naturally make commercial space more desirable and this has already started to become apparent with rents rising in the area.

Increased investment is leading to increased accessibility and increased development with London that will hopefully result in a booming commercial market within Central London.
 
Barclay Fox is a Central London property advisory business that helps landlords and tenants maximise income through the letting of office space. We focus on smaller units in the market, a sector too often overlooked by other agencies.

Following the previous years of economic downturn, it is evident that the opinions of some investors are already final. Recent articles have claimed that 2012 is set to be yet another tough year for UK commercial real estate.

The safety factors of the prime core properties are evidently the dominating option, whilst investors are somewhat overseeing the potential rewards that a secondary asset could deliver.

According to a recent article, Forty-five per cent of medium-to-large businesses in London stated that they would now be less likely to consider non-prime investment, with only 20% claiming that they would bemore likely to consider compared to 12 months ago.

Due to the previous years of preference for prime properties, the secondary asset alternative has experienced a dampening in value due to the increased risk of maintaining rental income.  

Fraser Williams of Barclay Fox comments "The current lack of demand for secondary property presents an investment opportunity for the right assets"    

The slowdown in pace which has been evident in the City of London market has failed to dampen demand for short term office space in the West End. Barclay Fox which specialises in short term offices space in Central London finds that demand is good for tenants looking to sublet their leases. Typically in this market tenants want to minimise their moving costs. If they can take a shorter lease and reduce fit-out costs then a move makes sense.