£5bn investment turnover for central London office market since early 2022

Wednesday, March 23, 2022 4:51 p.m.

The central London office market has seen turnover of £5bn so far this year as confidence in the category returns.

Estate advisers Knight Frank revealed a 300% increase on the first quarter of 2021, when there were deals worth £1.2billion.

There is currently £5.8bn of office supply in central London, with institutional investors targeting secure income opportunities and green premiums.

Blockbuster deals to be struck this year include CK Asset Holdings’ £1.2 billion sale of 5 Broadgate, on a long-term lease from UBS, to Broadgate Five Holdings, the £718 million acquisition by Ho Bee Land from The Scalpel and Sun Venture’s £120m purchase of WeWork-let 120 Morgate.

The deals were driven by the capital’s higher yielding office assets compared to other cities and the greater number of green listed stocks.

The market is currently undersupplied with just £4.1bn of assets currently available, Knight Frank added.

This month, Australia’s Australian Super pension fund injected £290m into a 50% stake in British Land’s 53-acre Canada Water Masterplan. The mixed-use development will be completed over the next 10 years and will include office space.

Nick Braybrook, Head of London Capital Markets at Knight Frank, said: “The large transactions so far this year reflect the strong appetite of global investors, with institutions looking for assets offering secure income opportunities. as well as ESG benchmarks that align with portfolio objectives.

Investor activity was boosted by confidence in the capital’s “underlying fundamentals and attractive pricing relative to global cities”, Braybrook added.

New business districts like Canada Water are also attracting the attention of long-term investors, according to Shabab Qadar, research partner at Knight Frank in London.

These districts have “demonstrated greater resilience in times of economic distress, better business performance relative to other submarkets, and generated gains in social value,” Qadar explained.

Current demand from active occupants stands at 7.6 m², suggesting a large flow of future transactions.

A lease of some 24.5 million square feet is set to expire within the next three years – as companies seek to review their working models and adapt their office approaches to a post-lockdown world.

Jose C. Birney