London Commercial Investment Reaches Six-Year High

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Commercial property transactions in Central London reached £19.9 billion in 2013, the highest figure since 2007, according to Cushman & Wakefield. 

The transaction volume was 47 percent higher than last year's £13.5 billion. However, the figure remains below the pre-crisis peak of £20.54 billion in 2007. 

Overseas investments were increasingly attracted to London's central business district in 2013, with the U.K. considered a safe haven for capital. 

"We have to remember 2013 was faced with potential conflict in Korea, Thailand, conflict in Syria, continued fears over Europe's economy, America's debt problems and slowing growth among the Brics," Bill Tyser, head of City investment Cushman & Wakefield, told the Financial Times.

Foreign buyers dominated commercial investments, especially during the fourth quarter. Overseas investors accounted for 80 percent of the market share in the City & Docklands area with £4.5 billion during the last three months of the year. In the West End, foreign investors accounted for 75 percent of the transaction volumes in 2013. 

Investor interest was highest in the City & Dockland, which includes Canary Wharf and Southwark. 

In the City & Docklands, total investment reached £5.6 billion during the fourth quarter, taking total investment for the year to £11.9 billion, according to the report. 

London's commercial investments were dominated by large transactions, including the U.K.'s two largest ever commercial property deals. Kuwati overseas sovereign fund St Martins purchased More London for £1.7 billion and Singapore's sovereign wealth fund GIC purchased a 50 percent stake in Broadgate for the same amount. 

The top five deals account for approximately 77 percent of total City & Docklands investment during the fourth quarter of 2013. 

Looking ahead, the firm predicts a "healthy but opportunity constrained" market during the first quarter of 2014. 

"Whilst some concerns persist over the possibility that further yield compression is limited in light of possible bond yield increases which might result in yield expansion on the horizon," Mr. Tyser said. "The market is now entering the era of a return to property fundamentals in light of economic recovery - principally that of property rental growth, with a controlled supply pipeline and increasing occupier sentiment, decision making and demand."

It was also a record year for the West End, with investments reaching £8 billion in 2013, the highest annual turnover on record. During the fourth quarter, the West End market recorded 39 transactions with an average deal size of £58.3 million. 

A report from CBRE showed rents in the West End reached $259.36 per square feet per year, passing Hong Kong as the world's most expensive rental market. 

High demand is expected to continue in the beginning of the year. 

"The outlook for 2014 is very positive," Mike Tremayne, head of West End investment at Cushman & Wakefield, said in the report. "With a continuing mismatch between high levels of investor demand and inefficient supply, we see no sign of this competitive market abating."