Majority of City of London offices owned by foreign investors

Development Securities’ report says overseas investors now own 52% of the Square Mile’s office buildings

Article posted: 22 Nov 2011

Offices in the City of London are more attractive to foreign investors than ever before, according to Who Owns the City, the fourth in a series of major studies published today by leading property investor and developer, Development Securities. Foreign investors now own 52% of the office space in the Square Mile, growing from 8% in 1980 and continuing an upward trend seen since the Big Bang.

The latest report, researched by the University of Cambridge, reveals that the market for office space in the City of London has displayed remarkable resilience to the 2008 global economic downturn. Surprisingly, the destruction of asset values in the aftermath of the crisis has not induced capital flight, as was experienced in the US. On the contrary, foreign investors have increased their share of City ownership, accounting for 66% of acquisitions by value since 2008. London, as a whole, attracts more inward office investment than any other city in the world, including New York.

Overseas buyers remain focused on prime City assets which are perceived to be of higher quality and to offer increased potential returns and greater liquidity – the average purchase price expended by foreign buyers between 2008 and 2011 was £91m compared with £27m on the part of UK investors.

The report also reveals the changing profile of City office owners including those with longer-term investment horizons. For example, there is a growing trend towards private ownership by high net worth investors who now own at least 6% of City office floorspace and possibly more given their shyness of the public eye.

Traditional owners – livery companies, institutions, established property companies – have experienced a sharp decline in City office ownership from 29% in 2005 to 17% in 2011. Meanwhile, specialist real estate investors have increased their share of City space, now accounting for 45% as against 35% in 2005.

Click here for a full copy of the report.

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Posted by Sara