Central London office investment is on course to hit £5.2bn for the first half of 2021, according to JLL – a 68% increase on the corresponding period last year.
The agency said that more than £4bn had already been traded in the second quarter, after a slow opening three months where deals were severely hampered by the Covid-19 lockdown.
The City of London has seen £1.86bn of office assets traded in the second quarter of 2021, while £2.2bn has been invested in the West End.
JLL said both markets have a significant number of deals in advanced stages of negotiation, with the City and West End totalling £1.49bn and £1.9bn of stock under offer respectively.
Julian Sandbach, head of central London office markets at JLL, said the numbers reflected “a significant increase” on the first part of the year, adding that there was “significant liquidity in the market”.
“The lack of widely available investment opportunities and ongoing travel restrictions are frustrating some of this capital. However, additional key sales are expected to go to offer stage over the next few weeks and activity is expected to increase. This will be fuelled by the anticipated broadening of opportunities that is expected in the second half of the year.”
He added that yields of 3.5% to 4% on prime office assets were attracting investors from mainland Europe, where other major cities are seeing corresponding yields of 2.5% to 3%.
The agency said £5.7bn of office assets are up for sale across central London, with a further £4bn of potential stock to reach the market in the coming months.
If all of these sales were to conclude in the second half of the year, transaction volumes for 2021 could reach £18bn, matching the volumes seen in 2018. However, the figure is more likely to be in the region of £15bn, JLL said.
Rob Jackson, head of City investment at JLL, said: “Recent market activity shows a strong pick-up in demand for core income with competitive bidding from predominantly institutional investors leading to strong prices being achieved.
“As travel restrictions ease, given the weight of capital seeking to invest in the London market, we expect to see downward pressure on yields for best-in-class assets.”
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