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London's West End Enjoys Strong Office Investment Returns on Record for 2015

Posted by Aliza Xandria Arellano on Feb 05, 2016 09:12 AM EST
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LONDON, ENGLAND - MARCH 26: The National Maritime Museum and the Isle of Dogs is seen from the Royal Observatory in Greenwich on March 26, 2012 in London, England. The Royal Observatory, Greenwich encompasses Flamsteed House, the original Observatory building which was designed by Sir Christopher Wren in 1675, as well as the Peter Harrison Planetarium, the Prime Meridian of the World, the Harrison timekeepers and the UK's largest refracting telescope. (Photo : Oli Scarff/Getty Images)

Given the staggering effect of the global economic downturn, the real estate sector is struggling. However, London's West End is enjoying strong office investment returns for the year 2015.

Based on the latest data from the global real estate consultant Knight Frank, as reported by World Property Journal, London's West End office investment market attained a record high for annual returns, approximately valued at £7.4 billion, or $10.8 billion, in sales.

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According to the same report, "Despite low prime office yield levels of 3.5 percent in the West End, investor interest in the market remained strong thanks to on-going rental growth, and widely held expectations that rents will increase further in 2016."

Meanwhile, Anthony Barnard, Head of West End Capital Markets, stated, "Investors are offered liquidity, real performance and security of income. The geographical landscape of investors is always changing, but the West End continues being truly international, drawing capital from all corners of the globe."

Furthermore, it was previously reported by Heart of London that the West End office sector attained one of the highest investment volumes on record at £6.4 billion and the London as a whole is considered the number one global city for real estate investment.

Chief economist James Roberts explained, "The West End's appeal has been a combination of safe haven, given the volatility we are seeing in the bond and equity markets, and the prospect of the income stream increasing via rental growth."

Roberts added on to say, "The coupon on a bond typically stays unchanged, but investors feel confident that the 'coupon' on a West End office, namely the rent cheque, will grow in the future. Some say that West End office yields are too low at 3.5 percent, but compared to many government bond yields around the world they look actually look high."

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