KUALA LUMPUR (Feb 8): Central London’s office take-up rate for the final quarter of 2016 has totalled 3.5 million sq ft, the highest since 3Q2015, and 15% above the long-term average.

The strong performance was driven by activity across the whole market, according to global property adviser Knight Frank.

In Knight Frank’s recent “The London Report”, it stated that the Central London property market has witnessed significant capital inflows since the Brexit referendum, despite an initial pause for breath.

“For London real estate, the shift towards a wider world of occupiers and investment capital is at an advanced stage. Seven of the 10 largest occupier deals in 2016 were to overseas corporations, particularly from North America, which is the same as in 2015,” said Knight Frank in a press statement.  

Of the £9.3 billion (RM51.59 billion) of overseas money invested in Central London offices in 2016, 80% came from outside of Europe.

China and Hong Kong were the largest sources of foreign investment, accounting for £2.9 billion, which was 60% more than that deployed by Europeans.

“In 2017, Central London will see international money diversify further, thanks to the fall in the pound’s value, widening the range of buyers in the market, and further reducing the importance of the European Union (EU) as a source of funds. This pattern will play out in other parts of the London economy,” said Knight Frank’s head of commercial John Snow.

Head of central London offices Stephen Clifton stressed that London’s long-term growth story will not be changed by a decision to leave the EU.

“A wall of overseas money is migrating towards London in 2017. The main problem facing investors will be sourcing stock. Overall, we enter 2017 with less certainty than many of us would like, or are used to. However, the fundamentals of the London office market are strong. In the leasing market, the tech firms have shrugged off Brexit and are taking space. In the investment market, overseas investors are showing a strong appetite for London offices. We view 2017 as a year that will surprise on the upside,” Clifton noted.

Knight Frank’s chief economist James Roberts agreed that it will see more pleasant surprises in 2017 given the stable office demands from tech and creative firms.

“I see this rising digital tide counter balancing the impact of financial job losses. If technology and creative industries in London continue to expand at their average growth rate over the next three years that would off-set a 15% fall in financial sector headcount,” Roberts said.

Citing anecdotal evidence, he suggested that tech firms are planning significant growth in 2017, with Facebook alone pledging to raise job numbers in London by 5%, as well as recent office deals by Apple at Battersea Power Station and Amazon at Principal Place, re-enforcing the message that tech is still committed to growth in London.

“I view Brexit as a two-year road bump for the London economy, with some back office jobs going abroad, but the number is being exceeded by job creation in the digital sector,” Roberts concluded. 

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