New data from CBRE shows that London office investment for the third quarter of the year has registered a significant increase, after office investment transactions reached £4.8 bn (€5.38 bn) in the three months to September 2017.
The figure represented a quarterly increase of 51% on Q2 2017, when investment levels reached £3.2 bn (€3.69 bn). This time last year, the figure was £1.7 bn (€1.91 bn). The strong Q3 took the year to date total to £13 bn (€14.58 bn), on par with the total for the entirety of 2016.
'We estimate that at the end of Q3 2017 there was close to £39 bn (€43.74 bn) of equity targeting London, close to a record high with Asian investors accounting for a significant proportion of this equity,' commented Stephen Pearson, head of city investment, CBRE.
'This highlights the continued appetite for London offices among Asian investors who have deployed £6.4 bn (€7.18 bn) into office assets so far this year. Pricing has remained firm for trophy assets in the capital and the continued high levels of demand are likely to be satisfied by the availability of stock, especially in the City.
'If a significant proportion of this stock transacts in the final quarter, investment levels could return to the levels seen in 2013 and 14.'
High transaction levels were again driven by overseas investors, who for the 16th quarter in a row represented the largest investor group, comprising 94% of total transaction volume.
The largest deal of the quarter was the sale of 20 Fenchurch Street (commonly referred to as the Walkie Talkie) by Landsec and Canary Wharf Group to LKK Health Products Group for £1.3 bn. This represented the largest single-asset transaction ever in the UK and is the second instance this year of an iconic City tower being purchased by a Hong Kong investor for more than £1 bn.
Asian buyers were the largest overseas investor in Q3 2017, transacting £3.2 bn (€3.69 bn) and representing 68% of all office transaction volume. This equated to the highest quarterly total for Asian investment on record. Building on the trend evident since the beginning of 2017, large lot sizes once again characterized the market.
In Q3 2017, there were 11 transactions over £100 mln (€113 mln), compared to just five in the same period last year. UK investors dominated the sell-side and represented 65% of disposals in Q3 2017, CBRE said.
