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Investors' preference for £100m+ London trophy buildings remains

wantspacegotspace.co.uk - Investors' preference for £100m+ London trophy buildings remainsBNP Paribas Real Estate’s latest research reports that despite overall volume of deals over £100m in price being down in 2011 and 2012, the preference for quality, trophy buildings remains very much in place.

In London in 2006, there were 48 deals which were more than £100 million, totalling £8.9 billion In 2007, this figure rose to 50 deals and £12.6 billion. In 2011, despite economic circumstances, over £6 billion was still spent on £100m+ buildings in 29 deals, and in 2012 to date this figure is £6.7 billion in 32 deals, so this looks on course to rise considerably by the end of the year.

What is interesting is that in 2006 and 2007, the proportion of deals that were £100m+ by value is 61%, and by number of deals, the proportion is 12%. In 2011 and 2012, the proportional figures are almost exactly the same with 60% of total volume and 13% of the number of deals.

Paul Abrey, executive director of investment at BNP Paribas Real Estate, commented: “It is important to understand that the market dynamics between this year and 2006 are very different. Put simply, 2006 was a market where acquisitions occurred through leverage, massively so from the money markets, whereas this is now no longer the case. In 2012, leverage for acquisition is extremely hard to come by – it is virtually non-existent.”

The larger acquisitions being made today are often by companies that have internal resources to buy them, such as sovereign wealth funds, super wealthy individuals or funds for investment.  These investor types are mostly from overseas and focused specifically on the London market.

“Although overall volumes traded are down, the continued demand for good quality, large assets demonstrate the drivers behind international investment in London: protection of wealth in a market that has the attractions of depth and transparency in assets that boast the fundamentals of secure, long to medium-term income streams. These trophy buildings also have the qualities necessary to position themselves to take advantage of positive rental growth,” added Abrey.

Posted by The Editor (wantspacegotspace) on 16th October 2012 (updated 23/10/2012)

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