Kevin Brunnock, NYC, Commercial Real Estate

New York City has taken the throne as the capital of commercial real estate.

London, which once took the position of the world’s premier city for foreign investment in commercial real estate, has been unseated due Brexit-bred fears. There seemed to be greater unease among investors leading up to the vote to leave the EU, which was approved by voters in late June.  

There was a 44 percent decrease when looking at cross-border capital flowing into London real estate when comparing post-referendum numbers to those during the same time frame in 2015. Erosion of London’s identity as a premier financial center has led many to forget that Britain has long been seen as a far more investor-friendly than the U.S., due greatly beneficial tax arrangements. Property investors have downsized the value of investments, particularly office buildings. One of Britain’s greatest foreign investors is Norway’s sovereign wealth fund, and they’ve chosen to reduce the value of their UK property portfolio by five percent.

During an interview, David Green-Morgan, director of global capital markets research for Jones Lang LaSalle Inc (JLL). in Chicago, said, “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 center.”

New York has seen gains of $10.3 billion in foreign investments. Compare that to the $6.9 billion that London took in during the same period. Just one year ago, London acquired $12.4 billion in foreign investment, surpassing New York by $1.1 billion, according to JLL.

Prices reached unsustainable levels just as concerns about the UK market began to circulate., which only partially demystifies decreases when investment to Britain are concerned. This year saw the largest decline since of financial crisis that took place during the years 2007 and 2008.

The U.S. has adopted underlying property fundamentals and strong demand in order to attract capital. Brexit has led cautious investors away from Britain, and, to some extent, away from Europe, and that investment is being driven toward the U.S. Capital is being routinely deployed through gateway cities such as Boston, New York City, Los Angeles, and San Francisco.