Office investment thaws as lockdown lifts

Agents and investors have welcomed tentative signs of life in the office investment market as some of the coronavirus lockdown restrictions start to lift. “We are starting to see green shoots appear in investment activity after three months of lockdown, with investors selectively looking to re-engage on investment opportunities,” said Martin Lay, head of City investment at Cushman & Wakefield. “At least three deal transactions in excess of £100m have gone under offer in the last 10 days and at pricing levels in line with those that we would have witnessed at the beginning of the year. This is likely to provide encouragement to other owners to dust off plans for assets which they had considered bringing to the market but subsequently put things on hold, and start the engine for greater liquidity in the second half of the year.” JLL’s head of central London capital markets, Julian Sandbach, said advisers are now using the lockdown loosening to start fresh asset inspections. “The launch of new marketing campaigns could still be held off for another month or so and of course travel quarantines will restrict overseas investor inspections,” Sandbach added. “But there is certainly strong interest from our Asia client base alongside European and UK investors who are keen to see product and will wish to travel as and when it is practical and safe to do so.” There are those waiting for distressed assets to come on the market, although it’s unclear whether a significant number of distressed assets will be forthcoming – Manish Chande, Clearbell Capital Anecdotally, dealmakers expect a trickle rather than a flood, and Clearbell Capital’s Manish Chande said that with economic worries still high, many investors will still prefer to sit on the sidelines. “There are those waiting for distressed assets to come on the market, although it’s unclear whether a significant number of distressed assets will be forthcoming,” he added. Phil Sturdy, head of transactions at Mayfair Capital, said his team has compiled a post-lockdown list of almost £16bn of office deals in various stages across the UK. Of that sum, he said, about £2.6bn has been exchanged or put under contract during lockdown, £5.2bn has “fallen away” and roughly £8bn remains under offer or has been paused. At BNP Paribas Real Estate, head of office investment Hugh White’s team is tracking £1.8bn of offices outside of London which have been or are being marketed. “The pandemic led to a freezing in activity, however we are now seeing tentative signs of activity albeit at much reduced volumes,” White said. “The lack of activity in the market was initially led by a lack of sellers as much as caution from buyers – however certain vendors are beginning to return. These include corporates needing to raise money through sale and leasebacks and a few closed ended funds needing to raise annual sums.” Any new assets being brought to market, or those which were put on pause pre-pandemic and are now being put back in motion, are likely to be taken selectively to potential buyers. Jonathan Harris of investment adviser Harris Associates said: “There’s appetite out there, but most of it is for one-to-one deals and off-market transactions… I don’t see many brochures coming out, but what I am seeing are people having quiet conversations. There’s definitely more momentum now than six weeks ago.” To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette