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London 'seen as safe haven for commercial property investors'

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London safe haven for commercial property investors

With conditions in the global economy remaining uncertain, it is difficult to predict how much international money transfer activity there will be among commercial property buyers this year.

However, London has been flagged up as one destination that could remain an attractive option with investors around the world over the next few months.

Capital Economics believes the UK capital is proving popular because some buyers around the world have lost confidence in many European countries and therefore see London as a relative safe haven.

Kelvin Davidson, the group's property economist, said this is despite the fact "it is actually prone to some pretty big cycles".

But investors who are hoping to benefit from capital appreciation during the next few months might end up being slightly disappointed. Capital Economics believes average commercial property values in the UK will fall by five per cent this year.

Mr Davidson acknowledged this does not mean the market is "falling off a cliff" and said this expected drop compares favourably with those seen in previous years. However, he stated that "the risks are on the downside and prices will drift lower".

Commercial property buyers who are looking to transfer money to Britain were also advised that the possibility of the country slipping back into recession remains. Mr Davidson said the economy could start to contract "even if we do get a bit of money flowing in" to London courtesy of foreign investors.

Nevertheless, the suggestion that the city could remain an appealing market for commercial property buyers during 2012 suggests conditions there remain positive when compared to those in many other locations.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, recently said that while rental expectations have declined across Britain in the last few months, the prime London office market is managing to "buck the trend".

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