Overseas investors own the majority of City office space
Development Securities’ latest ‘Who Owns The City?’ report, its fourth in a series that began in 1998, shows that for the first time foreign ownership of City office property has overtaken the level of UK ownership of offices in the Square Mile. Just 8% of City offices were owned by non-UK investors in 1980: this figure passed 25% in the mid-1990s and now stands at 52%, the firm says.
“London as a whole attracts more inward office investment than any other city in the world, including New York,” says Development Securities CEO Michael Marx. With €72bn of sales activity between 2007 and 2011, London dwarfs Paris (€43bn) and Frankfurt (€11bn) as the most attractive market for office investment in Europe, the report says.
The report also shows that overseas investors are focused on prime assets in the City. The average value of buildings bought by foreign investors between 2008 and 2011 was £91m, compared with £27m for UK buyers. UK buyers accounted for 43% of purchases during this period by floorspace, but only 34% in terms of value.
The market correction has boosted foreign investors’ interest, demonstrating the “remarkable resilience” of the market for office space in the City of London and helping to maintain its liquidity. This has improved its attractiveness to property investors, financial firms, and a growing number of private individuals, the company notes. This last category of investor now accounts for around 6% of City office floorspace, according to the report, which notes that this may be an underestimate given the preference of these individuals for privacy and the difficulties in tracing ownership. Real estate investors account for around 45% of floorspace and financial firms for 24%. Direct institutional ownership has fallen from 29% in 2005 to around 17% in 2011, the report notes.
Germany is the most significant foreign investor in City offices, with a 16% share of the market. The report notes that US and Middle East ownership has been expanding but Japanese holdings of City office property have dwindled to just 2% from a peak of about 11% in the early 1990s.
