London tops survey as most popular place to invest in commercial property in 2010

Written by Ray Clancy

Monday, 01 February 2010 09:56

London is Europe’s most popular location for new property acquisitions by investors in 2010, as the city’s real estate industry improves on the back of easing credit and stabilising values, according to a report published today (Monday February 01).

London is also named as the fifth best place for new development in 2010, up 18 places from last year, in the latest report from PricewaterhouseCoopers and the Urban Land Institute.

It is fourth best in terms of investment performance of existing properties and overall the UK capital’s improved ratings for 2010 shows a significantly improved sentiment towards it, real estate markets.

The pound’s weakness and the scale of price declines allowed London to beat Munich, last year’s top placed city, Hamburg and Paris. Prices of offices in central London fell 50% in the two years through July, more than most other European cities. London has also become more attractive to overseas investors because of the pound’s 25% fall against key currencies.

‘The worst may be over and the bottom has been reached for London. There’s a concern that for prime assets with good tenants, there’s a bubble developing,’ said John Forbes, PwC’s of real estate.

Another survey by the Association of Foreign Investors in Real Estate in the US, released on January 18, also showed London surged as the top destination for commercial real estate investment, beating Washington D.C. and New York.

ULI and PWC, which surveyed more than 600 industry players including investors, developers and bankers, said other popular European investment targets included Munich, Hamburg, Paris and Istanbul. For the second year Dublin offered the worst prospects for new investments, the survey showed. Moscow, Barcelona and Madrid were also shunned as risky markets.

The overall market, however, still faced a long, slow haul to recovery, the report says. ‘We are looking at a crawl back up the hill and how much values recover will depend on where Europe ends up economically against global competition,’ said ULI Europe Chairman Alexander Otto.

The market also has to negotiate its way through the looming problem of refinancing of hundreds of billions of euros worth of real estate and it is unclear how this would play out, the report points out.

Respondents were also worried that an abrupt withdrawal of stimulus funds by European governments that could derail the nascent economic recovery, causing a return to recession and further hitting occupier markets

‘The key issue is the occupier side of the equation. Investors are nervous and they are concentrating on the deeper, more liquid markets,’ added Forbes.