2.0 European investors in London
2.1 Introduction
Foreign Direct Investment is a concept that has attracted the attention of most economists. It has been held among most scholars that London offers an attractive climate for business operation and foreign investments. This section of the research paper will attempt to critically analyze the European countries’ investment concept into London’s commercial property. The section will draw most arguments from different literature, performing critical analysis, and then forms a conclusion. Moreover, the paper will also highlight the research limitations from the existing literature.
2.2 The Concept of International Investment
Sotelo and McGreal (2016) define international investment as the movement of goods and assets from one particular country to another, intending to acquire more profits. Such activities have been witnessed since the conception of trade and international migrations. Rogers and Koh (2017) state that foreign direct investment is one of the economic variables contributing to rapid population growth. Accordingly, the authors argue that commercial property is one area that has attracted much investment from different investors worldwide. However, the investors’ choice to choose a particular region for Foreign Direct investments, either in the form of venture capital or commercial property investments, depends on a number of factors. According to Sotelo and McGreal (2016), most foreign and local investors prefer investing in commercial property due to many profits realized in such processes. However, like any other investment opportunity, factors such as transparency, market and economic stability, and market dynamics are some factors that may encourage investors to invest in such markets. Accordingly, for a long time, London has enjoyed a period of foreign investment from pacific Asia due to such benefits. However, Watt and Minton (2016) relate that such trends have not been the case over recent years, as more investments into London’s commercial property have come from the European Union members and not from Pacific Asia. The same report highlights the reasons for European Nations’ investment in London’s commercial property due to the ‘liquidity nature’ of London, its transparency, and the availability of different investors within the London (Watt and Minton, 2016). For an extended period, London has been considered a financial and business centre for World’srld’s largest investments and investors. However, while most economists and scholars agree that London has the potential to attract more European investors to invest in its commercial property, the influence and consequences of Brexit cannot be underestimated (Mazzucato, 2018). There is a mixed reaction to Brexit’s impact on the investments from the European countries into London, with some reports indicating that such countries’ investment volume has significantly reduced (Glucksberg, 2016). Other reports suggest that due to new UK trade policies formulated after the Brexit decisions would address the investment-related issues from the European countries into the England stock market.
2.3 London, a World’s financial Center
Most surveys conducted to investigate the world’s financial status reported that about 79% of the respondents mentioned London asWorld’srld’s number one financial center against the 11% who suggested New York (DeVerteuil and Manley, 2017). Since such survey was conducted, much time has elapsed and there has been record no significant evidence to suggest that much has changed. From the study conducted by McFetridge (2019), it is clear to note the status of the London City in retaining its own crown as the most craved for city inWorldworld both by the European Nations and other nations with about 30% compared to 22% and 15% of Tokyo and New York. However, according to Crosby and Henneberry (2016), the choice of London City asWorld’srld’s leading commercial property investment destination is not contributed to by the fact that it is a financial centre, but rather due to its geographical location, its accessibility, and political stability enjoyed by England. Poon (2017) arguing on the same thought as proposed by Crosby and Henneberry (2016) and states that while different investors would choose New York as their preferred investment destination, such factors as geographical location and trade policies may hinder such moves. Hence according to Poon (2017) and Crosby and Henneberry (2016), trade and investment policies put in place by a specific country may influence the choice of that country as a major investment destination.
Similarly, as Briston (2017) argued, all the evidence and opinions that suggest one city like a crown for investment destination depend on who a particular individual is reading and drawing the data. Hence it can be argued that there is not statistically accurate research and data to suggest that all or most international investors would prefer London over New York. However, what cannot be argued is that London is the world financial leader and which attracts billions of dollars of investments from all overWorld world. Based on Wiggan (2018) findings, the growth from the non-European countries alone rose from £52 billion to £82 from 2007 to 2015. There is clarity that from such data, London constitutes what Gallent (2016) and other financial economists describe as International Financial Center.
Briston (2017) argues that one of the key factors for property market investment is the political stability, stable currency in the world currency standards, and other professional services provided by the country to promote institutional developments. However, such mentioned factors are what have been used by different economists to suggest that London is the leading global financial Center. For instance, Wiggan (2018) ague that oWorldworld leading investment cities as London and Tokyo also enjoy currency stability and political stability. From such a report, the authors argue that such factors cannot be used as a justification for its commercial investment privileges. However, another exciting thought is proposed by Minton, Duman, James, and Hancox (2018). They argue that from the fact that London enjoys its central location, and hence centrally positioned time zone gives it an upper hand in ensuring that it is well related and compared against both the Asia and the Westworld world of the American countries.
2.4 Transparency
Foreign investments depend much on the factor of transparency. According to Sullivan and Mackenzie (2017), most investors involve in transactions that involve a huge amount of finances. Hence, transparency is a critical factor in determining the choice of an investment destination. Most investors agree that London has offered a financial market for different investors for a long time, which has gained much of their confidence. On the other hand, it has been argued that the emerging markets are the potential in offering great investment returns, and hence most investors can opt for such markets for greater returns. However, as Welfens and Baier (2018) argue, such emerging markets, while they promise great returns, their level of transparency is very low, as the investors are most likely not to acquire quality information, an industry benchmark, and professional services.