The property market in London and the price of oil have an interesting link. High prices for the commodity at the start of the decade encouraged a number of investors from the Middle East to purchase properties in the city where they could stand to earn good returns. Property was seen as a safe investment with prices rising and strong demand. A number of high profile properties were sold during this period.
One of the biggest purchases in this time was 1 Cabot Square, the home of Credit Suisse in Canary Wharf. The Qatar Investment Authority (QIA) paid £330 million for the building in 2012, seeing it as a major opportunity and the chance to expand their holdings in the city further. The 21 floor office covers 540,000 square feet and was completed in 1991.
At the time of the purchase the QIA had budgeted oil prices to stay at or close to $65 per barrel. The market decided otherwise though and the price has come down gradually over the last few years. In fact many investors are expecting the commodity to fall below $35 a barrel, a 12 year low, because of overproduction and lower demand. This has led many people from the Middle East to reassess their investment strategies.
The recent news that QIA will put 1 Cabot Square on the market for £450 million is a good example of the change in strategy. The sale would allow them to invest more in large redevelopment opportunities in the city that are seen to have the potential for higher returns. They are not the only investor to be considering this kind of move.
The current price of oil and the conditions in the property market could result in more high profile buildings in London owned by Middle Eastern investors being put up for sale. It will be interesting to see how the market reacts and what price these major buildings are sold for if they sell.