London offices have attracted three times the investment volume in Q1 2022 compared to last year.
The data comes from agent Knight Frank, which credited the surge to global capital continuing to target London office assets for secure income growth opportunities.
Just £1.2bn went into London offices in Q1 2021 as the market went into the second year of the covid-19 crisis hampering travel plans of investors.
With £5.8bn of central London office deals currently under offer, investors continue to compete for assets in an undersupplied market where only £4.1bn worth of assets is currently available, added the agent.
‘Investment turnover so far this year is already higher than the £4.5bn recorded in Q4 2021.This follows a robust 2021, which saw investment transactions in London offices reach £12.7bn, a rise of £3.3bn compared with 2020 – representing the highest annual change since 2017.’
London’s growth prospects, higher yielding office assets relative to Europe’s gateway cities, and larger pool of green-rated stock, has seen numerous big-ticket deals complete this year. Notable transactions include CK Asset Holdings’ £1.2bn sale of 5 Broadgate, let long-term to UBS, to Broadgate Five Holdings, Ho Bee Land’s £718m acquisition of The Scalpel and Sun Venture’s £120m purchase of WeWork-let 120 Moorgate.
March also saw Australian pension fund AustralianSuper inject £290mln for a 50% stake in British Land’s 53-acre Canada Water Masterplan project, which is transforming the area over the next 10 years into a new sustainable, mixed-use district, including offices.
Nick Braybrook, head of London capital markets at Knight Frank, said: ‘The big-ticket deals since the start of the year reflects strong global investor appetite, with institutions hunting for assets that offer secure income opportunities as well as ESG credentials that align with portfolio targets.’
He added investment activity had been fuelled by confidence in London’s underlying fundamentals, and ‘attractive pricing’ compared to other global cities. London’s 1,078 office buildings with a BREEAM rating of Good or above is more than twice the number in Paris, which is the next largest European gateway city. Office buildings in London with an ‘Excellent’ or “Very Good” BREEAM rating have been shown to achieve sales premia of 10% compared to unrated buildings.'
Leasing activity continues to underpin investor sentiment with current active occupier demand standing at 7.6mln ft2 indicating a significant flow of future transactions. The 24.5mln ft2 of lease expiries pending between now and the end of 2025 also indicates that a large number of occupiers will make a step change in their office strategies, following the trend towards the best-in-class sustainable workspaces.
