Deal flow in London’s West End real estate market is “still under threat”, according to Savills, with investment tumbling by more than half over the first six months of 2023.
The agency expects the first-half tally to come in at around £1.6bn, compared with £3.7bn in the same period of last year and around £1.2bn for H1 2020.
The year-on-year drop comes despite an uptick in the number of transactions over recent months. Savills tracked 14 deals in Q1 compared with 24 deals so far in Q2. The agency predicts that Q2 investment will reach £900m on the back of recent activity. It said more than £1bn is under offer, marking a change in sentiment.
Paul Cockburn, head of the West End team at Savills, said: “It’s reassuring that against the backdrop of economic uncertainty and rising rates, we’ve seen a flurry of pre-summer activity.
“Despite questions and negative comments around the future of the office, it’s clear many specialist investors disagree and some are now seeing this as a buying opportunity, with investor appetite concentrated on both core submarkets and quality, all of which have seen discounts from previous highs.
“The polarisation within the occupational markets is mirrored in the capital market and we are unquestionably seeing a widening of the definition of secondary. Property needs to prove it can provide a sustainable cashflow and if it can’t then demand and pricing is still under threat.”
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