The global real estate sector has experienced a flurry of activity going into the second half of 2020, as institutional investors seek to rebalance their portfolios for the final quarter of a tumultuous year. London is proving particularly attractive, given prime yields on office assets of 4 per cent. Set against yields of 2-3 per cent across office property stock in global cities such as Paris, Frankfurt, and Munich, London property is offering a significant premium, as reported by Savills.
The international property advisor revealed in a recent analysis that European investor activity in the UK outshone that of AsiaPac investors for the first time since 2011. A low-interest rate macroeconomic environment, combined with shortages in available stock, has served to catalyse competition for deals with the first half of 2020 commercial investment amounting to just under £3 billion. This comprised 39 per cent (£1.17 billion) of European Investment, £428 million of Asian investment, and approximately £1 billion of UK investment activity.
The average 25-year return for investment grade private commercial real estate property was 9.4 per cent, according to a National Council of Real Estate Investment Fiduciaries (NCREIF) report. Hence, the UK commercial property investment recovery has been underpinned by yield-seeking property retail funds, pension funds and other vehicles determined to source and complete deals.
This renewed confidence, as lockdown restrictions have been gradually lifted, saw £2 billion transacted in July, according to a Colliers International report. The global commercial real estate services organisation’s August property snapshot forecasts an uptick in post-June this year. London remains well-positioned for long term capital deployment strategies to deliver attractive returns predicated on the strength of the underlying asset performance.
According to the latest research from the international real estate advisor Savills, European investment accounted for 39% (£1.17 billion) of all activity.