Savills calls bottom of market for London offices and industrial

The bottom may have been reached in some industrial and office markets, including London, according to Savills. The firm’s latest Offices and Industrial Capital Markets Quarterly reports show that while yields in many key markets around the world have been upheld by a significant lack of stock, the bottom may have been reached in some sub-markets. Logistics investment markets, it points out, are experiencing a period of stagnation, with volumes 57% down from their Q1 2022 peak, following a two-year investment boom. Markets that fully rebased last year, such as the UK, are seeing more activity, which is once again supporting competition for the best assets. However, Savills expects further outward yield expansion over the next 12 months in a number of European markets, including Germany. Marcus de Minckwitz, head of EMEA industrial and logistics at Savills, said: “Investment criteria are becoming more stringent in the industrial and logistics sector, with a focus on best-in-class assets and price adjusted value-add opportunities. The market is in a state of anticipation, awaiting stability in the macroeconomic environment. “Once there is more clarity around pricing levels and interest rates, we anticipate an uptick in activity. This is already evident in the UK, where the benchmark yield for a prime asset in London experienced a 25 basis point compression in Q1, settling at 4.75%. We look forward to the markets fully stabilising over the next 12 months and investment volumes returning.” Savills said the picture in the global office investment markets is similar. While most markets are likely to see further yield expansion this year as price discovery works against sellers, yields in London are expected to stabilise as it starts to attract more interest. Rasheed Hassan, head of global cross border investment at Savills, said: “Weak office investment volumes have been matched by equally sluggish fundraising activity. The fast rise in the cost of debt has created uncertainty and many investors are on pause while they wait to see an end in sight. “We do expect to see some further upward pressure on yields over the next 12 months in a number of gateway markets as they require more time to adjust, but in London – often a bellwether for other markets due to greater levels of liquidity and transparency – yields are once again piquing the interest of global investors. We are starting to see some similar signs of stabilisation in Paris for best in class assets too.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo by London From The Rooftops/Bav Media/Shutterstock