£41bn of dry power to be released on central London
More than £40bn of dry powder is set to fall on central London offices and retail, according to BNP Paribas Real Estate.
BNP PRE calculated the estimate based on an analysis of completed and pending deals, together with market intelligence from its own global network and private banking platform.
Fergus Keane, head of central London investment at the firm, said: “Investors are armed with significant capital expenditure, around £41bn, for office and retail assets, but they are seeking values ideally at around 75-80% of last year’s pricing in what we identity as a three-tiered landscape.”
More than £40bn of dry powder is set to fall on central London offices and retail, according to BNP Paribas Real Estate.
BNP PRE calculated the estimate based on an analysis of completed and pending deals, together with market intelligence from its own global network and private banking platform.
Fergus Keane, head of central London investment at the firm, said: “Investors are armed with significant capital expenditure, around £41bn, for office and retail assets, but they are seeking values ideally at around 75-80% of last year’s pricing in what we identity as a three-tiered landscape.”
BNP PRE said investors were looking for either ultra-prime ESG assets, which would suit long-term holders and top-tier tenants, opportunities to upgrade less fit-for-purpose buildings in a yield play and obsolete stock which can be repurposed.
“It’s penalty time for international investors looking at London, and they have until the summer to convert,” Keane added. “The market is all about relationships at the moment, and there are more fireside chats than ever happening around pricing, in an effort to bridge the dichotomy on pricing between vendors.”
According to its initial Q1 2023 data, central London office investment activity is returning to relatively normal levels, with at least £2.5bn likely to complete by the end of March.
This will mark a 182% increase on the £0.9bn that transacted in Q4 2022. BNP PRE expects prime office yields to peak for the key central London markets at around 4.75-5% for the City and 4% for the West End.
In London’s retail sector, while the luxury and supermarket/convenience sectors have been resilient, investors are now considering the mass market retail sector given the correction that has occurred in pricing and rents in recent years.
Keane added: “With tourism numbers now reaching pre-pandemic levels and other changes around internet saturation, repurposing of department stores and, indeed, Crossrail now open, markets such as Oxford Street and Regent Street are becoming very interesting in central London for the first time in a long time.”
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