Foreigners Snap Up $2bn in London Property in Christmas Week

Foreign investment in the London property market has been growing for 18 months, but never so fast as in the week before Christmas. In one week alone buyers from Asia, Africa and Europe bought £1.3 billion worth of skyscrapers, upmarket clothes shops and sprawling City office developments.

The surge of demand shows that London still retains its safe haven status even as the EU crisis worsens and there was talk of British isolation.

“Buyers are aware that now is a good time to come into the London market as many sellers are distressed or concerned about the impact of the eurozone crisis on future valuations,” said James Beckham, director of capital markets at Jones Lang LaSalle, the property services group.

The purchase of Tower 42 Nathan Kirsh, the South African property tycoon, from BlackRock and Hermes Real Estate, was the biggest and most noteworthy sale of the week. The tallest occupied skyscraper in the City and former headquarters of NatWest bank went for £282.5m.

The Malaysian government's investment arm Permodalan Nasional Bhd also made the noteworthy shortlist with its £350m office complex purchase. In its UK debut PNB snapped up the 460,000 square foot Silk Street Building just down the road from Tower 42.

It is not just prime office stock that has attracted overseas interest, however. A property investment vehicle backed by Ernesto Bertarelli, the Swiss-Italian pharmaceuticals billionaire, on Wednesday announced its first investment, acquiring a 186,000 sq ft mixed-used building in Mayfair in a deal rumoured to be worth more than £100m.

Growth Predicted in US Commercial Property

According to a recent report by PricewaterhouseCoopers LLP, the United States commercial property sales are expected to increase within the next few years, as more and more property investors gain confidence in the market as a whole.

According to this quarterly survey, job growth, as well as higher business and consumer optimism, are encouraging purchasers to get into the market now with the interest rates where they are. By waiting, interest rates could increase, as well as push prices up in the office, industrial, multifamily, and retail sectors.

Everyone is awaiting recovery of the real estate industry, and as confidence grows among investors, the better will be the results for the industry. The long wait has caused some investors to become more eager to get back in there.

According to an index from the Massachusetts Institute of Technology Center for Real Estate in Massachusetts, commercial real estate prices surges 19 percent in 2010. Estimates from real estate experts believe that commercial property transactions could increase up to 40 percent this year, to $135 billion.

Additonally, the PricewaterhouseCoopers report stated that with low interest rates and stiff competition among buyers, the chances of getting good returns on investments are favorable. In 27 of 31 office markets, capitalization rates decreased.

It is estimated that within the next two years, most industrial markets will improve, with 86.2 percent expected to be in recovery by 2012 as demand surges. With supply and demand becoming more balanced, vacancy rates should decrease and the rental industry should increase.

The multifamily sector has been doing quite well due largely to more challenging lending restrictions and limited home buying opportunities. As a result, demand for apartments have increased and are expected to continue for the next couple of years.

http://www.bloomberg.com/news/2011-03-21/deal-volume-to-drive-u-s-commercial-real-estate-recovery-pwc-survey-says.html