London's office buildings still 'safe bet' for foreign investors post Brexit
Foreign buyers are swarming London's commercial property market as they look to capitalise on the collapse in sterling following the EU referendum, with Asian and US investors at the front of the queue.
Property giants CBRE and Colliers have both seen a surge of interest from buyers from as far afield as South Korea and Taiwan as the value of the pound continues to nosedive, with London still seen as a "safe bet" despite Britain's vote to leave the EU.
Miles Gibson, head of UK research at CBRE, said: "There's strong interest from US and Asian investors because of the weaker pound.
"What's interesting about the Asian investors is that it's a very diverse range of nationalities that are expressing an interest. South Koreans, Taiwanese, Malaysians and Singaporeans are all in there.
"They tend to be interested in prime central London office space as they see it as a safe bet - good long-term income with their capital preserved.
"Brexit hasn't altered the idea of it being a safe bet because the fundamentals haven't changed: London still excels when it comes to financial services, transparency, languages and universities."
Office blocks in central London are the biggest lure to potential investors, and the Asian enquiries come as property experts believe the currency fall will also spark fresh investment in the capital from more established players, including those in North American and the Middle East.
Prices in the capital have become markedly cheaper for overseas buyers since the referendum result, which caused the pound to slump to 31-year lows against the dollar with no sign of a recovery to pre-Brexit levels.
To compound matters, sterling dropped 2% against the dollar on Thursday following the Bank of England's decision to cut interest rates to 0.25% for the first time since 2009.
Richard Divall, head of cross border capital markets for Colliers International, said there is still a "large focus" on the UK as an investment destination and the "world has not gone away since the EU referendum".
He added: "We are seeing new entrants from South Africa, China and other parts of Asia researching the market and some having immediate success as well as several European institutions.
"Although the drop in sterling is attractive, I haven't heard this being the primary reason to buy. Investors are seeing it as an added bonus and we would expect North American, Asian and Middle Eastern appetite to increase going forward."
According to Capital Economics, overseas investors accounted for more than half of commercial property purchases over the last year, and experts believe this new wave of interest will help prop up prices.
Mr Gibson said: "This new interest will support prices. Also supporting prices will be a pause in the supply side, which will be adversely affected and fall away substantially. If you're a builder you're unlikely to begin speculatively constructing an office block in an uncertain environment."
However, in the longer term, experts believe that the future of London's commercial property market is tied up in the outcome of Brexit negotiations.
"Longer term, the outcome for London's commercial property sector is dependent on the nature of the trade agreement the PM strikes and the free movement of people.
"It's very important to have access to the single market, in both the low and high skilled segments. There are real concerns that the workforce, particularly in London, is not big enough to support economic growth."