Published On : 05/01/2024

US spending on London real estate rebounds to highest in eight years

By Iain Withers

LONDON (Reuters) – U.S. investors are buying up London commercial property at the fastest rate in eight years, data compiled by BNP Paribas’s real estate arm showed, lured by signs the market in Britain is recovering faster than the harder-hit United States.

Commercial property values and sales have plunged globally in recent years – including in Britain – as soaring borrowing costs and emptying post-pandemic offices have eroded investments. Vacancy rates have jumped, especially in the U.S.

U.S. investor interest in Britain is growing, helped by more appealing “leasing fundamentals” and a stronger dollar versus the pound, BNP Paribas Real Estate said.

U.S. property markets remained mired in concerns about sticky interest rates, a slower return to the office and political uncertainty before the U.S. election, it added.

U.S.-based investors spent 1.9 billion pounds ($2.4 billion) on London commercial property in January-March – up six-fold on the prior year and the most since the final quarter of 2015, according to the data.

“This positive uplift into this new cycle tells us U.S. capital is firmly back in the market,” said Fergus Keane, BNP Paribas Real Estate’s head of central London capital markets.

High-profile deals included MCR Hotels’ 275 million pound purchase of the BT Tower in central London, with the prominent former telecoms tower to be converted into a luxury hotel, and Elliott Management and Oval Real Estate’s 300 million pound acquisition of a mixed-use portfolio in the capital’s West End.

Across Britain, U.S. investors spent 3.1 billion pounds on property in the quarter, up two-thirds on 2023 and the most since early 2022, BNPP said.

U.S. domestic political tensions were “certainly at play” in the upswing in investment, Keane added.

Britain is poised to be the biggest beneficiary of U.S. investment into real estate overseas, with $13 billion waiting to be deployed, up from $10 billion in 2023, according to separate Knight Frank research covering 19 major markets.

($1 = 0.7957 pounds)

(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Mark Potter)

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