There has been much fanfare about the level of offices being converted to residential, but land sales previously dominated by residential buyers are now finding favour for commercial schemes
The trend for conversion of office space into residential in London has quietly reversed over the past nine months.
In the second quarter of 2014, a full 91% of all land sales in the capital were accounted for by residential development sites – which declined to 44% and 28% in the third and fourth quarters, respectively.
The pendulum has now swung firmly in the other direction. In Q1 2015 residential land sales made up just 10% of the total, with commercial uses making up 88%, according to new research by CBRE.
A total of £900m of land sales were completed in Q1 this year, and a further £300m was under offer or exchanged, according to the agent.
CBRE head of central London development, Peter Burns, said: “The sheer weight of demand for commercial property in central London and the strong rental growth currently forecast have led to this dramatic increase in land sales for commercial use in the first quarter.
“Although it is too early to consider this a step change for 2015, we expect investors to become ever more agile in their development strategies.”
Twenty-two land sales were made in Q1 2015, compared with eight in Q4 2014 and 25 in Q3 2014.
The average deal size has also risen to £43m this quarter, compared with £36m in 2014. Domestic buyers accounted for two-thirds of land purchases.
