London office deals see ‘profound’ fall as investment halves
The central London office investment market has struggled to pull itself from the depths of economic uncertainty, with investment falling by 55% year-on-year over the first half of 2023.
Analysts at JLL said £3.5bn of deals were struck in the first half of the year, a 42% fall from the 10-year average. Some £1.8bn was invested in the City, closely followed by the West End, which saw £1.6bn of investment.
The figures also showed that there are still plenty of deals to be done, with £1.8bn of space under offer. But the story remains that not all submarkets are equal, with the West End racing ahead with £1.2bn of stock in live deals versus £553m in the City.
The central London office investment market has struggled to pull itself from the depths of economic uncertainty, with investment falling by 55% year-on-year over the first half of 2023.
Analysts at JLL said £3.5bn of deals were struck in the first half of the year, a 42% fall from the 10-year average. Some £1.8bn was invested in the City, closely followed by the West End, which saw £1.6bn of investment.
The figures also showed that there are still plenty of deals to be done, with £1.8bn of space under offer. But the story remains that not all submarkets are equal, with the West End racing ahead with £1.2bn of stock in live deals versus £553m in the City.
Despite the decline in investment volumes, the capital has remained attractive to international buyers. Investment from Asia-Pacific represented 59% of purchases within the market, which can be partially attributed to the acquisition of St Katharine Docks by Singaporean buyer CDL.
Other such deals include the sale of Sancroft, Paternoster Square, EC4, to Japanese investor Mitsui Fudosan, Gamuda’s acquisition of Winchester House on London Wall, EC2, and China Chem’s purchase of 1 New Street Square, EC4.
Julian Sandbach, head of central London capital markets at JLL, said: “The extent of the slowdown in capital invested in central London commercial real estate in the first half of 2023 is profound. The effects of rising interest rates have had a material impact on pricing and confidence as investors continue to seek higher returns to compensate for the margin required over the risk-free rate.
“While the level of completed transactions has reduced significantly, there appears to be more of an acceptance by owners as to where pricing has fallen to, despite the lack of transactional evidence for valuers to use, and we do expect to see more activity in the second half of the year, particularly if we see current acute volatility settle and positive messaging around the cost of money peaking.”
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