The London office investment market is waking from its Covid-induced slumber, with more than £14bn of assets up for grabs, under offer or being prepped for sale.
Agents have reported a “noticeable step change” in activity in recent weeks, after a number of significant London assets exchanged contracts or went under offer.
Some £4.65bn of office buildings are being prepared for sale across the West End and City markets, according to JLL. There is £3.3bn of stock currently under offer and £5.6bn listed for sale.
The figures indicate a marked increase in activity compared to the first quarter of this year, when just £1.2bn of real estate changed hands across the West End and City market.
The latest deals to buoy agents’ moods include Brookfield’s £635m deal to buy Plantation Place on Fenchurch Street, EC3, which has been on hold for more than a year and marks the UK’s biggest office buy since the start of the pandemic.
Stephen Down, head of central London investment at Savills, said: “I think it is fair to say that the market is beginning to wake up,” adding that the deal at Plantation Place was “an indication that the investors are once again willing to commit to the market”.
Other major investment deals in recent weeks include German investor Union’s £500m purchase of BT’s future headquarters at One Braham in Aldgate, as well as the delayed £600m sale of Landsec’s Petty France office building in Westminster, which houses the Ministry of Justice.
Martin Lay, head of London office capital markets at Cushman & Wakefield, said: “This return in investor confidence and evidence of strong pricing levels is expected to lead to further sales being brought to the market in the coming months which had previously been put on hold during the lockdown.”
Stock still short
Despite increasing demand from buyers, the supply of buildings going up for sale remains thin, agents said, with deals tending towards safer investments rather than riskier value-add buys focused on redevelopment and refurbishment.
James Abrahams, head of City investment at Allsop, said that this was in part down to refurbishment opportunities remaining comparatively expensive “due to the increased cost of materials”.
Savills’ Down added: “There is a relative scarcity of fresh stock to consider and the focus is still at the defensive and financeable core end of the risk profile – buyers and lenders alike will be more cautious in the value-add and opportunistic space in the short term at least.”
Last month saw the collapse of a £90m sale of 40 Broadway in Victoria (see p17), a redevelopment opportunity on which Allsop was acting for seller Tellon Capital, after a potential buyer withdrew.
Leasing leads the way
But optimism remains high among agents, who believe that a recent flurry of activity in the leasing market will lead to more buildings going up for sale.
Last week, EG revealed that law firm Skadden, Arps, Slate, Meagher & Flom is lining up space at 22 Bishopsgate, EC2, as its new London headquarters, while Apple is under offer on a new office at One Bank Street in Canary Wharf.
Rob Corbett, head of West End investment at JLL, said: “The reactivation of the occupational market, with very robust rents being achieved, has given investors confidence that the London office market is resilient and will perform well as we emerge from the pandemic.
“Looking forward; we are confident in the level of demand from domestic and overseas investors right across the risk spectrum. With more buyable stock and travel restrictions being relaxed, we are excited for the next few months ahead.”
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