EDITOR’S COMMENT Many would argue that the halcyon days of 125 Shaftesbury came five years ago. WeWork had leased the entirety of the Soho office block to Facebook and, at the end of the year, Mike Hussey’s Almacantar struck a deal to sell the building to Korean investors advised by Vestas Investment Management for £267m.
It’s easy to see this week’s sale of the now-empty building to Mitsubishi Estate London and Dutch developer Edge as a sign of how tough times have become in the office investment market.
At £150m, the price is a drop of more than 40% on the last time the building changed hands and £30m lower than CBRE and Savills were touting the block for when marketing began three months ago.
The furthest of those falls happened across a five-year stretch dominated by debates over whether companies really even need an office – WeWork-run or otherwise – and what it needs to offer if they do.
In a research note published in August, directors at investor Castleforge said 125 Shaftesbury “should never have been regarded as a safe, core investment in the first place”, arguing that WeWork’s commitment to its lease was unreliable and that the building had proved “precisely the type of office that blue-chip occupiers no longer want to lease until someone completely transforms it”.
But now that might finally change – and that’s worth celebrating. Edge has rarely done things by halves – when it revealed details of its debut London scheme, EDGE London Bridge, in 2020, the Dutch developer promised the capital’s most sustainable office project.
If you’re looking for a buyer with the track record to create something remarkable out of a vacant block that WeWork couldn’t make work well enough, you can make an argument for Edge.
There are other reasons to cheer a deal that analysts at Savills predicted would be a “strong bellwether” for the investment market – including the fact that it got done at all. Buyers and sellers have been so far apart on valuations for so long, and so many assets brought to market only to be yanked back by vendors that baulk at the bids they receive.
The discount to 125 Shaftesbury’s last trade and most recent asking price might be steep but it gives us an idea of where values lie for that sort of building in this sort of market. At the moment, every comparable counts.
With more deals making it across the finishing line, agents could be forgiven for feeling optimistic as they enter the final stretch of the year. Successes in Q4 will be relative, of course – it won’t take much to put a smile on an investment dealmaker’s face after the woes of much of this year. But there’s a feeling that things are starting to shift again. People are making moves – considered, careful moves, but moves nonetheless.
This week we report on further signs of what might be the next normal as other London sites are put up for sale, including the government-let 8-20 Pocock Street on the South Bank and a Lothbury-owned parade of buildings including shops, offices and homes in Covent Garden.
The specifics of the deals struck for those assets – which types of buyers bite, whether they can secure debt for the deal and how much, what they then plan to do with the assets – will set the tone for whatever recovery is to come.
To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews
