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Foreigners Spend $12B in Square Mile

LONDON-Foreigners have spent euro 9.2 billion ($11.8 billion) buying property over the past two years and now own one half of the City of London. This makes it vulnerable to a variety of external shocks.

By Anita Howarth | Updated on June 02, 2006

LONDON-Foreigners have steadily increased their ownership of property in the City of London to nearly half of all available investment stock. The Germans own 18% and Americans 6.8%.

A study by Reading University found that city offices are also now heavily leveraged and are increasingly owned by private equity vehicles, many with short-term interests. The proportion of overseas ownership has more than doubled in less than 10 years, from 20% to 45%, or 36 million sf of office. Multiple owners now account for 54% of the total floor space available in the city. The debt outstanding on all commercial property in this country stood at £138 billion at the end of 2005, more than three times the size of the lending peak that preceded the last property crash.

“Traditionally, city property owners took a long-term view on their investments and traded infrequently, with almost all offices having a single owner,” the study stated. “By contrast, much of today’s investment activity seems focused on short-term gains with less regard for risk. This, in turn, raises a key question: What if a substantial number of investors exited the market at the same speed as they entered?”

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