Dearth of deals hits London office market as Brexit spooks investors

PROPERTY investors slashed purchases of office buildings in London by £3 billion in the first half of the year due to the nervous wait for a resolution to the Brexit saga, new figures showed on Monday.

Transactions in the first six months will reach around £5 billion, property agent JLL has calculated. That is down from £8.1 billion in the same period in 2018.

UK buyers were dominant and continued to spend in the City and West End. But would-be purchasers from overseas have decided to wait and see what rents and occupier demand will look like once Britain leaves the EU, the research shows.

Turbulence has struck the London property market this year after the UK’s March 29 exit was delayed twice. Singapore’s Ho Bee Land is among firms that recently told the Standard they are worried about Britain crashing out of the bloc without a deal.

Julian Sandbach, head of central London capital markets at JLL, said: “Political uncertainty is continuing to impact investor confidence, and this is most acutely felt by institutional investors who are particularly cautious due to uncertainty and understandably risk.”

However, he stressed there is a wall of money “sitting on the sidelines awaiting further clarification on Brexit outcomes”.

While prices have not suffered the uncertainty is adding to the dilemma of would-be buyers. Boris Johnson, the front-runner in the race to become Conservative leader and next prime minister, stressed again today that “we can, we must and we will” leave the European Union on October 31.

Property sources say the currency risk is a factor for foreign buyers because of the rising chances of a no-deal potentially sending the pound sharply lower, immediately denting their investment.

But JLL also pointed to a strong London leasing market, with over four million square feet of offices set to be signed for in the first half, suggesting tenants are committed to staying or expanding in the capital.

Facebook, Brewin Dolphin and Sony Music have all agreed deals to snap up new space, while Netflix was today reported to be hunting for a new HQ.

JLL’s City lettings chief Dan Burn added: “London has a dwindling supply pipeline and although many cranes can be seen across its skyline a number of these developments have been pre-leased."