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Brexit

For tech giants and Asian investors, it’s business as usual in post-Brexit London

Hugh Dixon says the city’s strength as a financial and real estate hub runs deep. Despite some initial jitters right after the UK vote last summer to leave the EU, investors have not abandoned London as feared

PUBLISHED : Sunday, 10 September, 2017, 12:34pm
UPDATED : Monday, 05 March, 2018, 4:52pm

The possible financial and business exodus in London following the Brexit vote last summer has yet to materialise. In fact, the opposite is happening. Key corporations, tech companies, and some banks have all been increasing their presence in the UK capital. Relocating key staff members and acquiring new commercial premises to expand existing business seems to be the focus since the Brexit vote.

One of the biggest votes of confidence has been Google’s decision to stick to its plans to build a new headquarters in London and increase its workforce by 3,000, attracting new talent from around the world. Google’s choice of London for growth places the city in pole position to be the global leader in digital technology.

However, this tech giant isn’t the only one expanding its footprint, with Amazon following suit by taking 600,000 sq ft of new office space to house a research and development centre. Additionally, Facebook is on the way to expanding its workforce by 50 per cent and Apple is reportedly taking 500,000 sq ft of office space in the newly developed Battersea Power Station.

Watch: A new Apple campus at Battersea Power Station

The Brexit vote hit London’s start-ups and new technology companies hard. In the months afterwards, fundraising dramatically fell due to economic instability and lack of confidence.

Hong Kong investors have also been leading the way when it comes to London commercial real estate

In fact, it was reported that the three months following the vote were the worst ever recorded for fundraising. Nevertheless, if you fast forward 10 to 12 months, there has been a shift in direction and a clear recovery. These start-ups have looked to Asia for investment, allowing the angels to take advantage of the weak British currency.

Hong Kong and Singapore stepped up and have played a vital role in the survival and expansion of UK tech companies. Undoubtedly, there is a cloud over the UK start-up scene, as access to EU talent may become difficult in the future.

Nevertheless, the strong UK education system and government support of start-ups should be able fill the gap, should this benefit disappear.

Hong Kong investors have also been leading the way when it comes to London commercial real estate, being the most active in the first half of this year. Despite the vote to leave the EU, investor demand has remained strong. This has mainly been propped up by the flow of investment from mainland China and Hong Kong.

The sale of the “Walkie Talkie” building in the City of London to Hong Kong food company Lee Kum Kee broke records for the acquisition of a single UK building. Excluding this transaction, Hong Kong investors have accounted for almost £2.2 billion (HK$22.5 billion) worth of commercial transactions to date in 2017, a significant increase from this time last year.

Although Hong Kong is the most prevalent investor, London is also seeing strong interest from Germany, Thailand and Singapore. Qatar’s sovereign wealth fund has also announced that its next investment cycle will focus on UK infrastructure and will amount to £5 billion.

The London residential property market is still seeing strong interest from expatriate investors, especially from Hong Kong. These individuals may be planning to move back in a few years’ time for either their children’s education or retirement, yet are purchasing two to three years beforehand.

Again, the strength of foreign currency against the pound has made it an attractive time, leading to an earlier start on their move back to the UK. The UK buy-to-let market has had some significant tax changes recently, which has caused a stagnation and cooling of the market in the sector. However, more confident ex­pats are undeterred by these changes and are taking a long-term view on the market.

Tech companies and overseas investors may have dominated the post-Brexit expansion headlines, but banks have also been setting firm foundations.

In London’s financial district, Wells Fargo has acquired new European headquarters to the tune of £300 million. This will bring all its staff under one roof, and will focus on US corporate clients with business in the UK and Europe. It is worth noting that this is not an expansion by the bank, but a reaffirmation of its commitment to London.

After the Brexit vote, Deutsche Bank had said it would look to Frankfurt for its European centre, yet it has recently signed a 25-year office lease to house their 5,000 employees in London. Deutsche taking this 469,000 sq ft space is yet another vote of confidence.

Without a doubt, there is uncertainty in the London market as the Brexit consequences have yet to play out. Although there has been an array of positive moves from financial institutions, a large number are still wary about potentially having to move employees and offices to provide their services across the EU. However, London has always been attractive to investors – due in part to its access to European markets, but also because of its education system and transport links. Thus, the city will remain a strong financial and real estate hub.

No doubt these drivers will come under threat when the final Brexit deal is reached but, for now, London is seeing strong investment and remains the focus for major companies.

Hugh Dixon is a partner at GWD Property Consultants in London