Commercial real estate in London: what is worth investing in?

Commercial real estate in London: what is worth investing in?
London leads in the ranking of cities for investment in real estate. “Zagranica” has prepared for you detailed material about how a foreigner can become a commercial property owner in London and where it is worth investing with a forecast for the coming years.
The financial capital of the world.
Business in London is not only prestigious and reliable, but also profitable. More specifically, there are a number of advantages that no metropolis can boast, except for London.
Advantages of purchasing commercial real estate in the Capital of the World:
simplified taxation system for foreigners. Non-residents pay taxes only with income earned in the UK; the average lease term for offices or shops is 10 years, which is higher than, for example, in Asian countries; incredibly high revenues from tourism. According to the study of Mastercard Global Destination Cities Index, last year London became the most visited city in the world. 18.9 million tourists spent in the UK capital a record 12.8 billion pounds sterling. With such figures it is easy to imagine the profitability of a hotel, restaurant, boutique or a regular retail store; prestige. However trite it may sound, the presence of business in London is worth a lot. Investments in commercial real estate of the British capital speak about the status and long-term perspective of any project.
How to become an owner of commercial real estate in London?
Buying property in England is very simple, even if you are a foreigner. To do this, you need to perform a number of simple actions.
Step 1: choose a real estate agency.
To this issue should be treated with all the scruples. It is best to contact a large company with a worldwide reputation and reputation, but the services of such firms are not cheap. As a rule, large real estate companies have representative offices in Moscow, St. Petersburg, Kiev, Astana and other large cities of the CIS countries, which simplifies the negotiation process and solves the issue of the language barrier. When choosing an agency, you should pay attention to the company’s work experience, the list of its partners, recommendations and customer comments that can be easily found on the Internet.
Step 2: choosing a property.
Everything is more complicated, because the demand for commercial real estate in London is ten times higher than the supply.
In the UK, in the commercial real estate market, due to the very high demand for objects, not the buyer chooses, but the seller. Therefore, even having provided all the necessary documents on time and offering the full requested value, there is a risk that the bid will be rejected by the seller. This is the only difficulty that can arise.
Step 3: we connect lawyers.
We connect lawyers. Representatives of the seller and the buyer exchange the data necessary for the conclusion of the transaction. The seller must provide all requested information about the facility, including the boundaries of possession, the lack of legal obligations to third parties, etc. It will also not be superfluous if your lawyer makes inquiries about the purchased real estate in local authorities, there should also decide on the reconstruction and expansion if necessary.
Now let’s talk about the documents. In order to conclude a deal to buy commercial real estate in London, you need to collect not too many papers, and you can do it without a lawyer.
To purchase commercial property in London, you need such documents:
– identity card (a copy of the first page of the passport);
– confirmation of the address of residence (registration from the internal passport);
– a brief information about the buyer (background), ie. in which industry the buyer works and where he earns money, what position he occupies, the name of the company, etc .;
– confirmation of the availability of funds for the purchase of real estate in London (usually an extract from the bank).
It is worth noting that the process of buying property in the UK, and in particular in London – is the same for all foreigners. Therefore, the package of documents for all, including those from the CIS countries, is identical. Also all are equal before checking. A more detailed procedure for clarifying the source of income can be associated not with the country of arrival of the buyer, but with the inadequacy of the documents provided.
Step 4: Exchange of contracts.
At this stage, the buyer makes a payment of the deposit, which is 10% of the value of the property.
Step 5: conclusion of the transaction and payment of taxes.
The buyer of real estate must pay registration tax and stamp duty (Stamp Duty Land Tax). The amount of fees depends on the value of the property being purchased.
Where is it worth investing? Survey of the districts of London.
The commercial real estate market of the capital of Great Britain is very heterogeneous. The supply, demand, prices, the percentage of profitability, the increase in the value of real estate and many other factors directly depend on the location of the object.
London is a huge city, and the prices for commercial real estate here vary greatly depending on the area. For example, if you purchase a retail space with a 3% return, then profit in the foreseeable future will be small. On the other hand, if you are lucky enough to become the owner of an office space in the City, near the Ring Line, the income can be hundreds of thousands, or even millions of pounds.
We offer to your attention a short guide to the most popular and attractive regions for investors in London:
City (The City) – the financial heart of the capital. This is dominated by commercial real estate for offices, and the main clientele is large international companies. According to the latest report of the agency BNP Paribas Real Estate (hereinafter referred to as the report), in 2014 in the City was concluded transactions with commercial real estate worth 8.23 billion pounds sterling, and the percentage of return on the elite property is 4.0%.
West End (The West End)
The West End is the historical and shopping center of London. Here are Oxford Street, Bond Street, Piccadilly, well-known to any self-respecting shopaholic. In addition, the main tourist lures are located in this part of the city, including Buckingham Palace, Westminster Abbey, Big Ben, etc.
Commercial real estate of the West End is, basically, premises for hotel and restaurant business, luxury boutiques and usual shops. Although office buildings here are also enough. The amount of transactions with commercial real estate in the West End in 2014 amounted to 6.54 billion pounds sterling.
Docklands – slightly undervalued by European investors in London with a high rating of free commercial premises – 8.31%. This is dominated by office buildings and large shopping centers.
The most popular for investment in commercial real estate are the central areas of London, such as Mayfair, Fitzrovia, Soho, St James’s, Victoria and Knightsbridge (West End). Such popularity is due to high demand from both international and local companies for offices, hotels, restaurants and retail outlets.
In the list of commercial property prices are in the lead in St James’s and Mayfair, where the cost goes up to 100,000 per square meter. m, due to the combination of high demand and low supply. Prices are falling as you move away from the center of London ( 1,000 per sq. M in Barking).
Speaking about the latest trends in the market, we should not forget that the investment in commercial real estate has two components: the price of real estate and rent. These factors have an inverse correlation – the faster the increase in the price of real estate, the lower the yield from rent.
It should be noted that the annual increase in prices from the peak of 12.95% (October 2014) to 11.04% (May 2015) should be noted. This is a clear indicator that the phase of recovery from the crisis is coming to an end. The basic return on investment will be driven by income from rent and growth in the rental price, and not by a rise in the value of real estate, as before.
On average, the price for a small commercial space for a shop or cafe will be:
– in the center (Mayfair, Fitzrovia, Soho, St James’s, Victoria and Knightsbridge) – 1.350.000.
– in remote areas beyond the third zone (Acton, Chiswick) – 275,000.
Large commercial properties in London are sold very rarely, their price may exceed 100 million.
Forecast for the coming years.
All experts agree that no major changes are expected in the foreseeable future. Foggy Albion will retain its status as the financial capital of the world, and the demand for its commercial real estate will only grow.
Despite the reduction in requirements for investment properties due to low supply, the demand for premises in central London will continue to dominate. The deteriorating situation in the Eurozone countries can also significantly affect the investment attractiveness of British real estate.
Residents of some countries of the Eurozone will be unprofitable to keep money in local assets in the light of the crisis situation and Euroskepticism. Immigration of people from these countries to London, distrust of the euro and the threat of its collapse will further increase the demand for real estate in the capital of Great Britain.
In general, the average demand for commercial real estate can move slightly towards the periphery of the city, due to the growing popularity of large warehouses. The increase in prices and profitability will continue, slightly slowing down in some areas.
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