Office take-up in central London in the final quarter of 2016 totalled 3.5m sq ft, the highest since Q3 2015 and 15% above the long-term average.
According to the latest research from Knight Frank, the central London property market has witnessed significant capital inflows since the referendum, despite an initial pause. For London real estate, the shift towards a wider world of occupiers and investment capital is at an advanced stage.
Seven of the 10 largest occupier deals in 2016 were to overseas corporations, particularly from North America, which was the same as in 2015.
Of the £9.3bn of overseas money invested in central London offices in 2016, 80% came from outside Europe. China and Hong Kong were the largest source of foreign investment, accounting for £2.9bn, which was 60% more than that deployed by Europeans.
John Snow, head of commercial at Knight Frank, said: “In 2017, central London will see international money diversify further, thanks to the fall in the pound’s value, widening the range of buyers in the market and further reducing the importance of the EU as a source of funds. This pattern will play out in other parts of the London economy, given that tech has always been US-biased and finance historically traded across the time zones.”
Stephen Clifton, head of central London offices at Knight Frank, said: “We see London’s long-term growth story unchanged by the decision to leave the EU. In order to become a city of 10 million people, the capital needs to extend its crowded CBD and there are seven new core districts currently under development – the Olympic Village adjacent to Stratford, Nine Elms, Waterloo, White City, London Bridge Quarter, Canary Wharf and Canada Water. London’s centre is rapidly expanding north, east, south and west.
James Roberts, chief economist at Knight Frank, added: “There is a lot of concern over London financial jobs moving to Europe as a result of Brexit, resulting in surplus space coming to the market. In reality, the figures show that tech and creative firms have long since overtaken finance as the driving force in the London office market. Tech and creative was the largest source of office demand in 2016, as it has been for every year since 2011.”
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