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CoStar Analysis: Domestic spending shifts to Outer London in Q1 2018

By Erin Amon - Thursday, May 10, 2018 7:00

Tight pricing and competition from foreign buyers has reduced domestic spending in Central London in recent years. However, domestic capital is increasingly finding a home in Outer London. Indeed, despite the decline in UK spending as a share of Greater London investment over the last couple of years, the proportion increased in Q1 2018, due to a surge of such investment in Outer London.

Overall sales volume in Outer London in the 12 months through Q1 2018 was £6.5bn, up 65% from the £4bn spent in the year prior. This compares to growth of just 17% in Central London over the same period (£15.2bn to £17.8bn).

Of the £1.5bn UK investors spent in London in Q1 2018, 55% was in Outer London, compared to the 10-year average proportion of just 35%. The £830m spent in Outer London was up 150% on the £330m spent in Q1 2017 and was 27% higher than the 10-year quarterly average.

The largest deal in Outer London in Q1 2018 was Spelthorne Borough Council’s acquisition of 12 Hammersmith Grove for £170m. Local councils have accounted for a growing proportion of UK investment in the last two years as they aim to utilise real estate revenue to counter funding cuts. In Q1 2018, councils spent more than £500m on commercial assets across the country.

Elsewhere, London-based REIT and flexible work space provider Workspace Group bought five of the Centro Buildings in Camden for £109m in January. The portfolio totals 131,000 sq ft and the sale reflected a 4.2% yield. Last-mile delivery hubs and leisure and hospitality portfolios are also proving increasingly popular to investors in the capital.

Please click here to download CoStar’s Q1 2018 UK Commercial Property Investment Report.

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