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Wednesday, November 23, 2011

52% of London office blocks owned mostly by German and US investors in 2011

LONDON: British investors own less than half the office properties in London city's financial hub, with foreign ownership of towers such as the Gherkin likely to continue, a report said.

Property company Development Securities said that 52% of city office blocks were foreign owned in 2011, up from 8% in 1980, with German and US investors hiking their stakes considerably over that period.

“City offices are perceived to offer quality and transparency, a safe haven for foreign buyers who have in turn deepened liquidity in the market,” chief executive Michael Marx said in the report, Who Owns the City.

IPD figures show property values fell 50% during the global financial meltdown to August 2009, subsequently rebounding 25%, creating a buying opportunity for cash-rich investors such as sovereign wealth funds, pension funds, insurance firms and real-estate investment companies.

“Traditional owners livery companies, institutions, established property companies have experienced a sharp decline in city office ownership,” Development Securities said, noting these investors now held 17% of the office stock, from 29% in 2005.

In their place, German investors hiked their market share to 16%, from 1% in 1980. US investors held 10%, from zero, while Middle East investors weighed in at 6%, from 3%, the survey found.

The 180m tall Gherkin tower, so-called because of its shape and one of the most distinctive in the city, has been part owned by German property behemoth IVG Immobilien since 2007.

Foreign ownership increased during the global financial crisis, Development Securities said, noting the changing dynamics of globalisation and international investment would continue to be reflected in city office ownership.

“Such resilience would appear all the more remarkable in the light of the city's associations with the failures of the international financial system. What offsets the systemic risk in relation to the city's lack of diversification is the exceptional liquidity that characterises its office market,” it said.

The Development Securities survey also showed the changing profile of owners, with a growing trend towards private ownership by high net worth individuals.

In terms of functional ownership, 41% of the office space was owned by companies in the finance, insurance and real estate sectors, and 57% by financial and business services firms.

By Reuters

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