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The Globalisation of London Commercial Real Estate Market: A Study of International Capitals
This research paper aimed at determining the key driving factors behind various types of international capitals inflow into London commercial real estate (CRE) market using both qualitative and quantitative methods. The qualitative study is carried out by a survey composed with 21 questions, conducted through interviews and emails by professionals from different backgrounds working in the London CRE market. The result demonstrates that investors prioritise generating considerable total returns (capital gain and yields) and analysing the economic environment over other requirements when investing in London CRE market. For quantitative analysis, panel data series has been used to carry out a longitudinal study along the 10-years’ timeline from Q1 2009 to Q4 2018. 20 individual data series on topics including socio-economic, demographic and bureaucratic characteristics have been collected from 15 European cities, including London, Paris, Frankfurt, Madrid Amsterdam, Brussels, Milan, Lisbon, Warsaw, Prague, Vienna, Stockholm, Oslo, Copenhagen and Helsinki. As our study targets on the London CRE market, markets of similar maturity in Europe have been selected to make the analysis more precise and relevant. We draw a conclusion that the most influential (statistically significant correlated) control variable group (based on the categorisation suggested by Lieser and Groh (2011)) is the Real Estate Investment Opportunities (urbanisation ratio and population growth) followed by Projected Investment Returns (including yield spread, real effective foreign exchange rate, rental growth, vacancy rate). Other key drives such as Economic Activity, Depth of Capital Market, Investor Protection and Legal Framework, Administrative Burdens and Regulatory Limitations are less statistically correlated with cross-border investment (XBI) activity. The Socio-Cultural and Political Environment is not statistically significant at all. Emerging effects of Brexit on the international investment volume have also been examined. Both qualitative and quantitative studies illustrated that XBI activities remain stable – investors are increasing or keeping their current holdings of London CRE despite the Brexit issue.

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