Brexit bargain hunters are descending on London.
Commercial property buyers are lured by the combination of the cheap pound and declining value of London real estate.
Wells Fargo bought a new office building in London on Monday, despite previously planning to only lease the property. The U.S. bank did not disclose the price, but sources close to the deal said it spent £300 million on the brand new building.
The pound has dropped 12% since the U.K. voted to leave the European Union almost a month ago.
The deal has been in the works for months, but last month’s vote for Brexit has made it a lot cheaper in dollar terms. The price of what will become Wells Fargo’s new U.K. headquarters slumped from $450 million to $394 million in just over three weeks.
Zhang Songqiao was another foreigner snapping a good deal. The Chinese property magnate bought a £42.3 million ($55.6 million) hotel in central London on Tuesday. In dollar terms, that’s nearly $8 million cheaper than before the Brexit vote.
It’s not just the exchange rate that’s making London real estate look attractive to foreigners. Several big U.K. asset management firms have frozen their commercial property funds or slashed their prices for investors who want to withdraw from them in the aftermath of the referendum.
Aberdeen Asset Management has imposed 17% price cut on its U.K. property fund, while L&G cut the value of its real estate fund by 10%.
Nigel Driffield, professor of international business at Warwick Business School, said the cheap pound is making assets in the U.K. attractive to foreign investors looking for long terms investment in relatively safe assets — like commercial real estate.
London commercial property is viewed as a safe bet by many investors, because demand for office space is still very high. The U.K. capital has 3.3% office space vacancy rate, according to property broker JLL. That compares to 7.3% in Paris and 10% in New York.
