International investor interest in London office market peaking, says Bidwells
The latest London Office Market 2021 report by Property Consultants Bidwells has revealed that investor interest in London based offices is starting to peak, with the market having a strong rebound from 2020.
Overseas investors are dominating the market by completing GBP4.3 billion of deals during the last quarter. European investors bought a total of GBP2.4 billion of property, and far eastern investors obtained GBP2.2 billion of capital.
Despite many businesses opting to have flexible working schedules, post-pandemic offices are still seen as a valuable part of the company, serving as an HQ; this is being currently being asserted by a growing number of companies.
The positive influx of investors looking at the central London office market responds to the rapid roll-out of vaccinations within the UK.
US tech companies were beneficial investors with increasing activity despite the disruption that Covid-19 caused. Investments in 2020 were expected to overtake 2019’s record year of assets at approximately GBP31.3 billion.
UK companies are still dominating the market, with only a slight decreased in interest compared to 2019.
Despite 2020 having low investor expectations, international investments have surprising flourished over the past year, becoming significant support within the market.
As a result of Brexit, London Financial companies have already relocated 7,500 jobs and over GBP1 trillion in assets to EU hubs to avoid disruption to EU clients, and this could be the start of the end of London's reign as Europe's top financial centre.
US-based pharmaceutical company Merrick & Co are one of the most prominent examples of international investments in London. The company have selected a Kings Cross based site for the development of their new 220,000 UK headquarters and research centre.
The company site will consist of a ten storey building, providing offices and research space for over 800 staff; construction is expected to start in the first half of 2021, with completion set for 2025.
Compared to the investor interest in buying offices, the London office letting market has remained quiet over the last quarter. This has brought office availability rate in London to a high, with the West End having a 7.3 per cent availability rate – the highest it has been in 10 years.
Commenting on the research, Sue Foxley, Research Director at Bidwells, says: "Central London Office investment falls to the lowest level in a decade. The pandemic impacted on investment activity in the Central London office market, with total activity over the year falling to GBP7.5 billion, the lowest level since the financial crisis impacted years of 2010/11. However, overseas investors remained active during the year, with 19 of the 20 Capital Markets Prime West End Office Yields transactions above GBP100 million involving international purchasers. The largest transaction was the GBP552 million purchase of the 390,000 sq ft 1&2 New Ludgate, EC4 by Singapore based Sun Ventures.”