Central London office investment down 63% in Q1
Investment volumes in the central London office market for Q1 2023 are expected to reach £2.1bn, a 63% drop from the corresponding quarter of 2022 and a 39% fall on the corresponding pre-Covid period of 2019.
Provisional figures from JLL show that £1.4bn was invested in the City of London and £670m in the West End throughout the first quarter of 2023.
JLL said the sharp year-on-year fall is in part a reflection of an unprecedentedly strong first quarter in 2022, with £5.7bn invested, owing to the wide-scale return to the office post-pandemic driving up volumes. The more “normal” start to 2019 saw £3.4bn transacted.
Investment volumes in the central London office market for Q1 2023 are expected to reach £2.1bn, a 63% drop from the corresponding quarter of 2022 and a 39% fall on the corresponding pre-Covid period of 2019.
Provisional figures from JLL show that £1.4bn was invested in the City of London and £670m in the West End throughout the first quarter of 2023.
JLL said the sharp year-on-year fall is in part a reflection of an unprecedentedly strong first quarter in 2022, with £5.7bn invested, owing to the wide-scale return to the office post-pandemic driving up volumes. The more “normal” start to 2019 saw £3.4bn transacted.
There were just 22 transactions across central London in Q1 this year. Notable transactions include the sale of St Katharine Docks to CDL for £395m, ChinaChem’s purchase of 1 New Street Square, EC4, for £349m and the sale of 60 Gracechurch Street, EC3, to Obayashi for £140m.
The muted start to 2023 follows a slow final quarter of 2022, in which £1.9bn was transacted. JLL attributed this in part to the volatility surrounding the government’s mini-Budget on 23 September and the subsequent fallout. The firm has predicted that investment activity will improve in the second half of 2023, with elevated capital flow from Asia-Pacific buyers, particularly those from Singapore and Hong Kong.
Julian Sandbach, head of central London office markets at JLL, said: “The level of capital deployed into central London in the first quarter of 2023 has been relatively muted with a total of £2.1bn invested, notably down on the corresponding period in 2022 when we saw £5.7bn committed following the end of Covid restrictions and a return to the office.
“Clearly, the significant inflationary pressures seen building from summer 2022 and the corresponding rising cost of financing have impacted confidence and liquidity, leading to a more cautious environment.”
He added: “Despite these challenges, London continues to see significant capital from overseas, notably Asia, with the largest transactions in the capital undertaken by Singaporean, Hong Kong and Japanese investors. Much of the investment is channelled into high-quality, well-specified, environmentally enhanced offices, which is where there is strong focus from occupiers seeking to pre-lease and capital seeking to fund or joint venture.
“International and domestic investors remain focused on obtaining London assets, and we expect to see investment volumes begin to increase in the coming months.”
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