London is no longer the world's premier city for foreign investment in commercial property as the UK’s decision to exit the European Union continues to deter many investors from pumping money into the British capital.
Growing concern that Brexit will lessen London’s appeal as a global financial centre means that many investors are now opting to invest elsewhere in the world, with New York replacing London as the top choice for foreign property investors.
Cross-border capital flows into London real estate fell 44% in the first six months of the year compared with the corresponding period in 2015, according to data from Jones Lang LaSalle (JLL).
New York gained $10.3bn (£7.9bn) in cross-border investments in the first six months of the year, up from $11.3bn (£8.6bn) for the same year-ago period, while London saw cross-border investments fall from $12.4bn (£9.5bn) in H1 2015 to $6.9bn (£5.3bn) in the first half of this year.
The findings act as a strong indication that there was a great deal of uncertainty in the market in the run-up to the EU vote, with many more investors set to be deterred by the UK’s surprise decision to leave the 28-member state.
“You're going to see people look to redeploy their capital elsewhere and the big one will be the U.S.. Most likely given that it is overseas capital, it will focus on gateway cities,” Cushman & Wakefield’s Ken McCarthy told Reuters, citing New York, Boston, Washington, Los Angeles and San Francisco.
According to JLL, many property investors fear that Britain’s exit from the EU would weaken the capital’s position as a premier financial centre and reduce the value of their investments, the majority of which are office buildings.
Norway's sovereign wealth fund, one of Britain’s largest foreign investors, last week cut the value of its UK property portfolio by 5% due to the outcome of the referendum.
David Green-Morgan, director of global capital markets research for JLL in Chicago, told the press: “It would be fair to say that London bore the brunt of Brexit fears.
“The big fear is that London will lose a lot of the financial service jobs that has made it such a global financial centre.”