Why London, and why now
is the right time to invest.
Why London, and why now is the right time to invest.
London will always be London, and when it comes to property, London has its own bubble, making it one of the most attractive cities to invest in.
Commercial property can seem more volatile than residential real estate investment. As the market rebounds and opportunities arise when others are looking to divest, it’s the right time to expand and diversify a property portfolio.
As we learned from the pandemic, everyone needs a place to live, not everyone needs a place to work. However, done right, commercial property is in fact a far stronger and safer investment. One of the key reasons is your tenants: They will be long-term and likely to lease your building for a substantial portion of its life. And some will invest their capital in upgrading your property to attract and retain the best staff.
Not all commercial property is a smart investment, getting this right is all about one thing: Location.
Why central London?
Key movers and shakers are extremely keen to be as close as possible to the city centre. This is a dynamic that has existed for centuries in London and isn’t going to change any time soon.
London has roughly 105,000 civil servants, but that is just the start. Much of the national economy is centred here, and much of the global economy flows through too. Law, finance, media, creative agencies, and wealth managers for example, all have their own hubs making business flow better than anywhere else in the world.
The endorsement of a central London postcode like SW1 carries real weight, and might get people meetings they otherwise wouldn’t have managed. Most importantly for these organisations, London is a place where the best talent in the world wants to live and work.
There is no better place to be a global citizen, with world-class culture, a plethora of cuisines, an events calendar with something on offer every night of the week, and Europe just a short flight away. With English still the most-studied language in the world, the newly-educated elite can easily feel at home here. Even if English is not the 1st or 2nd language, every culture and nationality is well represented in London.
This talent knows their value and will not settle for second best, why live and work somewhere boring when something as exciting as London is on offer. That kind of excitement isn’t going to fade away just because the United Kingdom is not in the EU any more. A great example is Switzerland and its continuous growth since 2016, when it decided to suspend further negotiations for EU membership, making Switzerland known as a country with “good offices” due to their neutrality.
Why the right buildings are in central London
Architectural tastes can change and buildings that seemed sleek and modern in the 1990s can feel incredibly dated now. That’s why focusing on legacy architecture is key. This is the so-called “Lindy Effect” – an organisation that has existed for 100 years is far more likely to survive another century than an organisation that has only existed for 100 days. The same is true of buildings, especially buildings that have the blessing of being grade-listed.
Grade I and II listed buildings can be found all over the city, but they are especially clustered in desirable postcodes where Government departments and top tier private sector organisations want offices – and are willing to pay a premium for them.
Why now is the right time to invest in London’s commercial property
The future for the office itself is bright. While the pandemic added some flexibility to the work week, a future of entirely remote work is simply unsustainable. Survey data shows Gen Z employees want a return to the office, where they can build connections and learn from their older colleagues. Data from Transport for London suggests weekday tube usage has almost completely recovered to pre-pandemic levels. Organisational leadership – whether that be CEOs, ministers, or permanent secretaries – are also pushing for full returns to the office. And for any Government agencies that handle sensitive information, a fully remote working environment is simply not possible.
Then there is the financial situation itself. Because of high interest rates and some post-pandemic uncertainty about the amount of office space required, it’s a great time to buy long-term assets at prices below their usual value. Most of your competition will have to raise finance in a very costly environment, so if you have the liquidity to make one of these long-term investments, there could not be a better moment.
This extends not just to the purchase itself but also to any renovations required. Older buildings often need to be retrofitted to attract the most secure and lucrative tenants, particularly ones who have exacting ESG standards to meet. The current owners may not have the liquidity to undertake such a project, meaning a good price can be negotiated.
Many investments promise something like generational wealth. But ask yourself what you are more confident about: The price of a particular stock or index exceeding inflation over the next 50 years, or the fact that people will still want to inhabit beautiful buildings that have existed for generations in London come the year 2073? Now think about how the population is continuously growing. If you have the ability to get into the market, there couldn’t be a better time to invest in it.
Published: August 10 2023
Author: Byron Baciocchi