Available core central London investment opportunities have declined almost 60% since their peak in Q1 2022, as core plus opportunities rocket according to Savills.
The international real estate advisor found that the number of available opportunities to invest in property in the core plus category have notably increased and now account for over 50% of available stock.
Figures showed that turnover in Central London, which totalled £13.5bn in 2022, was in line with the previous year’s figure but was ultimately lower than the long-term average by 19%.
The most notable quarter was Q1, which accounted for 46% of 2022 turnover and was 360% up on 2021 and 85% above the 10-year average. This meant that H1 as a whole contributed two thirds of the yearly total volume.
Wider political and economic instability dented activity in the second half of the year, which was reflected in the lowest Q4 volume since 1998. Only £1.2bn was transacted in Q4, which is 80% down on the long-term average, the firm found.
Figures also showed that London activity continued to be driven by international investment, which accounted for 77% of turnover. The biggest investment came from Asia Pacific investors, who represented a third of investment turnover in 2022. This was more than double the amount they invested in 2021. They were followed by US and European investors, but it was investors from the Middle East who accounted for 45% of Q4 turnover, a figure that was gained from two major transactions.
Savills head of Central London investment Richard Garside said that the strength of demand for London offices that was evident at the start of 2022, “quickly changed” because of “uncertainty around both local and global political and economic shocks”.
Market uncertainty gave investors “good reason to pause” according to Garside, who said: “How this plays out in 2023 will be defined to some extent by these wider factors and some old school fundamentals of supply and demand.
“Our investment stock tracker is showing an ongoing lack of best-in-class core assets, suggesting that pricing of these buildings will continue to be cushioned from pressures felt elsewhere in the market as investors are becoming more and more selective. ”
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