London, UK (May 1, 2024): A surge in investment activity from US companies is reshaping the landscape of UK commercial real estate, with London experiencing a significant boost. Analysis by BNP Paribas Real Estate reveals a 64% year-on-year increase in total UK inward investment from US buyers in the first quarter of 2024, reaching £3 billion compared to £1.9 billion in the same period of 2023. This marks the highest quarterly investment since the COVID-19 pandemic and a 117% increase from the previous quarter.

Experts cite several factors behind this renewed interest from US investors. The US commercial real estate market is currently facing challenges such as foreclosures, tight financing conditions, and a slow return of employees to offices. Geopolitical instability and stronger-than-expected economic growth in the UK, relative to Europe, have further bolstered the dollar and widened the gap between US and European borrowing costs.

"This situation makes markets like central London, where leasing fundamentals are more attractive and the currency effect is more favourable, increasingly appealing for investment," explains Charlie Tattersall, Senior Associate Director, Capital Markets Research at BNP Paribas Real Estate.

Simon Williams, Head of National Markets at BNP Paribas Real Estate, suggests that London and much of the UK may now offer a "value correction narrative." They believe the UK market corrected more quickly than others, making it a prime target for opportunistic and value-add investments from US capital.

Of the £3 billion invested in Q1 2024, a staggering £1.9 billion went towards London commercial property. This represents the highest total since Q4 2015 and the largest share (63%) of the UK figure since the first quarter of 2019.

London's hotel and office sectors saw the most significant investment activity, totaling £871 million and £575 million respectively. Notable deals include MCR's £275 million purchase of the BT Tower for hotel redevelopment, Langham Estate's £300 million mixed-use portfolio sale, and Starwood Capital's acquisition of a £800 million hotel portfolio.

The report also highlights positive signs for London's office market, with prime rents rising from £75 to £77.50 per square foot in the City, and £150 to £155 per square foot in Mayfair/St James.

This surge in US investment signifies a vote of confidence in the UK commercial real estate market, particularly in London. Experts believe this trend will likely continue throughout 2024, driven by attractive valuations and a recovering market environment.