Arthur takes a look at the struggling British commercial property sector, and also an up and coming rival.
British commercial property prices have risen at their slowest rate for three months, in line with a historically weak January. However, the rental income from commercial property increased by 0.1pc in January, continuing the rental markets strong performance since November.
The commercial property sector had a torrid time after Brexit. After the votes were counted and the result announced, one quarter of all commercial property deals in Britain fell through, equivalent to around £3.5bn.
Jason Winfield (Cushman & Wakefield), said this:
“Deals have taken longer to complete and a greater proportion have been withdrawn but, on the flip side, values have held up remarkably well”
Part of the reason this may be the case, especially in London, is the foreign interest. Whilst in the rest of the country, domestic buyers account for about 60pc of sales, in London foreign buyers account for nearly 75pc. This was boosted by the weak pound after the Brexit vote. However, this may begin to reverse, with research showing that 32pc of respondents in the commercial property sector said that they had seen evidence of businesses looking to relocate away from the UK.
New Kid on the block?
Since the late 1990s, South Korea has had a relatively modest trade in international investment in its commercial real estate. However, investors are now being lured by strong investment yields, cheap prime office space and low volatility.
Last year, it is estimated that foreign investors were involved in over 50pc of the country’s commercial property transactions. The increase in foreign interest in the market drove total sales up by 15pc, to $12bn for the year.
Whilst South Korea has not toppled the likes of China or Japan, better ownership systems and higher yields means that it is fast becoming one of the hottest commercial property markets in the world.
It would not be surprising to see some of the businesses that do jump ship from Britain, resettling themselves in Seoul.