Central London office investment sales set to reach £13.7bn
Latest research indicates investment volumes for 2021 could total in excess of £13bn
The latest research from JLL has highlighted that close to £12bn of Central London commercial offices have been traded so far in 2021 and that this could climb to £13.7bn by the year-end. Whilst this figure would exceed 2019 when £12.6bn of sales completed and is up on the £9bn transacted in 2020, it is 9% down on the 10-year average for Central London office transactions (£15bn).
To date in 2021 £7.2bn of office assets have been traded in the City, whilst the West End has seen £4.8bn of transactions.
JLL’s research found that there is currently close to £5bn of deals currently being negotiated across central London, with up to £2bn of this likely to complete by the year-end. There are a further £6.3bn of assets being actively marketed indicating a strong pipeline line of sales for 2022.
A strong final quarter to 2021 has seen some significant transactions completed. In the City these include DWS’s sale of 2&3 Bankside to Omnicom (understood to be in excess of the £410m guide price), Mitsui Fudosan’s acquisition of the LSE site from EDGE for £145m and M&G’s disposal of Saffron House to Blackrock for £95m. Key transactions in the West End market have included USS’s £143m forward funding of a new hotel at 40 Eastbourne Terrace, Threadneedle’s disposal of the Heals building to KKR for £117.5m, Lazari’s acquisition of 13 Hanover Square from a private vendor for £69m and AM Alpha’s purchase of LABS House from Labtech for £108m.
Julian Sandbach, Head of Central London Office Markets at JLL, said: “Despite a slow start to 2021, because of Covid restrictions, we have seen sustained activity across Central London throughout the year and are edging closer to returning to 10-year average volumes. We have seen increased confidence from investors, and with less than two weeks to go until the year-end we anticipate that more transactions will complete, which could see the volume of assets transacted this year reach close to £13.7bn.
“Throughout 2021, and despite the continuance of the global pandemic, London has continued to draw global capital into commercial real estate transactions. There has been a strong concentration of buyers from Europe, particularly German institutional capital, who recognise both London’s place on the global financial stage post Brexit, but also the relative yield attraction than London offers compared to major European cities. Asian capital has also featured, but challenges around travel and quarantine measures have impacted volumes this year, albeit there have been some significant trades using local asset management platforms. Private equity investors have also competed strongly in the value-add space and taken comfort in the recovery seen across Central London leasing markets. Increasingly we are seeing investors and developers wishing to acquire or create the highest quality, most sustainable and amenity rich assets, recognising that businesses will want to locate in offices which both inspire, retain, attract and above all provide high well-being to their employees. This trend will continue and expect to see more activity in the development funding and joint venturing arena in 2022”
“Investors are now considering strategies for, 2022 and based on ongoing levels of activity we expect Q1 2022 to be a busy quarter across Central London with continuing high levels of liquidity and yields remaining firm. If we continue to see positive signs on businesses returning to London offices, despite the current surge in cases, this will only add additional confidence to investors views of acquiring further London commercial real estate."
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 95,000 as of September 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.