U.S. investors have shown a renewed interest in London’s commercial property market, with spending reaching its highest level in eight years. According to data from BNP Paribas Real Estate, U.S.-based investors spent 1.9 billion pounds ($2.4 billion) on London commercial property in the first quarter of 2023 – a six-fold increase from the previous year.
This surge in investment marks a significant return of U.S. capital to the London market. Fergus Keane, head of central London capital markets at BNP Paribas Real Estate, commented, “This significant surge in investment marks the return of U.S. capital to the London market.”
Several factors are driving this renewed interest in London real estate. First, the UK market appears to be recovering more swiftly compared to the United States, where commercial property values and sales have been hit hard by high borrowing costs, empty offices, and rising vacancy rates. U.S. investors are attracted to the more favorable “leasing fundamentals” and a stronger dollar against the pound in the UK market.
In contrast, the U.S. property market continues to grapple with concerns over persistently high interest rates, a delayed return to the office, and political uncertainty ahead of the U.S. election. Domestic political tensions in the U.S. might also be contributing to the upswing in investment in the UK.
Across the UK, U.S. investors spent a total of 3.1 billion pounds on property in the first quarter, marking a two-thirds increase from 2023 and the highest level since early 2022. According to separate research by Knight Frank, the UK is expected to be the primary recipient of U.S. investment in international real estate, with $13 billion earmarked for deployment, up from $10 billion in 2023.
The resurgence in U.S. investment in London’s commercial property market is a significant development, reflecting the relative strength of the UK market compared to the challenges faced by the U.S. property sector. As the global economic landscape continues to evolve, it will be interesting to see how this trend unfolds in the coming years.
