Investment volumes for central London offices reach £3.5bn at the half way point of 2020
The latest research from leading real estate adviser JLL has indicated that overall investment into central London offices will total £3.54bn for the first half of 2020, representing a fall of 21% against the corresponding period in 2019 when £4.5bn was invested.
According to JLL, just over half a billion pounds of transactions took place across central London in the second quarter of 2020 - £306m of this capital was invested into the City and £225m was spent in the West End.
Julian Sandbach, head of central London capital markets at JLL, said: “Whilst transaction volumes for the first half of the year are notably down, the last few weeks have provided signs of encouragement for the central London investment market. Transactions have exchanged in both the City and West End markets with some deals successfully reaching completion underlining a continued appetite from investors across the lot-size spectrum.
“There remains a clear depth of demand particularly for core, well-let, long-income opportunities and pricing on these assets has been fairly robust. The market is seeing much broader pricing spreads on value-add and development stock, highlighting the division of opinion on the leasing markets and levels of occupational demand.”
JLL’s research identified that there is around £3.77bn of transactions that are thought to be under offer including One London Wall Place at around £500m and One New Oxford Street at around £175m. There are a number of assets which have been under offer for some time, including many before the lockdown began, and there remains caution around whether final terms can be agreed so there is potential for a significant swing in the numbers.
According to JLL there are a number of assets that are being prepared for marketing, however the timing of the launch of these sales will be to some extent dependent on investors ability to travel so they may not be launched until September at the earliest.
Julian Sandbach added: “Investor sentiment is cautiously improving and vendors are bringing sales forward based on strategic plans rather than necessity. Whilst we expect conditions to remain challenging as we move into the second half of the year, central London real estate will retain its long-term appeal, particularly in prime space. The significant yield compression seen in key European Cities has created a notable arbitrage with the UK on a risk adjusted basis and is forcing European and global investors to look towards London in the search for yield. Covid-19 has clearly led to investors adopting a more cautious approach and the inability to travel has delayed decisions, but we expect the central London office market to retain its far-reaching appeal to those seeking relative returns.”
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 $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.