£5.2bn of Central London offices set to be traded in the first half of the year
JLL has identified a further £3.4bn of deals that are under offer
The latest research from JLL has highlighted that over £4bn of Central London offices have been traded throughout the second quarter of 2021. The total amount of office investment transactions for the first half of the year is likely to reach £5.2bn, which would represent a significant increase of 68% on the £3.1bn invested into Central London offices for the corresponding period of 2020.
The City has seen £1.86bn of office assets traded in Q2 2021, whilst £2.2bn has been invested in London’s West End. JLL cited that both markets have a significant number of deals in advanced stages of negotiation with the City and West End totalling £1.49bn and £1.9bn of stock under offer respectively.
Julian Sandbach, head of Central London office markets at JLL, said: “The numbers for Q2 reflect a significant increase on the first quarter of the year when, due to lockdown, only £1.2bn of transactions took place and this positive sentiment is continuing to increase across the Central London market. There are a number of landmark transactions in exclusivity and there is significant liquidity in the market.
“The lack of widely available investment opportunities and ongoing travel restrictions are frustrating some of this capital. However, additional key sales are expected to go to offer stage over the next few weeks and activity is expected to increase. This will be fuelled by the anticipated broadening of opportunities that is expected in the second half of the year.
“Overseas investors, particularly from mainland Europe, remain active and are focussed on the advantageous yield premiums in London at 3.5% to 4.0% on prime assets, compared to other major European cities, where the corresponding yields are 2.5% to 3.0%. Investors are increasingly optimistic about London’s economic prospects in a post Brexit environment and are encouraged by enhanced occupier activity and the positive return to work messaging.”
JLL’s research highlighted a total of £5.7bn of office assets are currently being marketed across Central London, with the potential for a further £4bn of stock to reach the market in the coming months. If all of these sales were to conclude in the second half of the year transaction volumes for 2021 could reach £18bn, matching the volumes seen in 2018, but in reality the figure is more likely to be in the region of £15bn.
Rob Jackson, head of City investment at JLL, said: “Recent market activity shows a strong pickup in demand for core income with competitive bidding from predominantly institutional investors leading to strong prices being achieved. As travel restrictions ease, given the weight of capital seeking to invest in the London market, we expect to see downward pressure on yields for best in class assets.”
Rob Corbett, head of West End investment at JLL, added: "We continue to see keen interest in Central London commercial property, lockdown restrictions have impacted total volumes traded however pricing for prime assets remains stable. The vaccination programme and opening of the economy is a huge boost to tenant and investor sentiment. "
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 91,000 as of March 31, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.