US investors pump £1bn into Central London offices since September
Investment flows into the Central London office market has hit £2.2bn since the beginning of October, according to neww research from Knight Frank.
US investors were the most active, responsible for 47 per cent of investment deals (£1bn), followed by UK investors who accounted for 29 per cent (£638m) and South East Asian investors comprising 11 per cent of total volumes (£242m).
This follows a busy third quarter for the investment market, which saw £3.8bn in turnover in line with long-term average levels. European investors accounted for 35 per cent of total volumes compared to 22 per cent from the US.
Leasing activity continued the upward trajectory and there has been 1.4m sq ft of take up over 115 deals.
The Telecommunications, Media and Technology (TMT) sector was a major driver of demand, accounting for 45 per cent of take up, followed by professional services firms (31 per cent) and financial services companies (9.3 per cent). Demand for best-in-class offices saw 72.8 per cent of take up concentrated within the prime office market which consists of new or recently refurbished stock. This flight to quality is also driving rents up in the core markets.
The largest completed leasing deals included Allen & Overy’s 254,000 sq ft letting at 1-2 Broadgate in Liverpool Street, Snapchat’s agreement to occupy 113,634 sq ft at Bloom, Clerkenwell and Daily Mail General Trust’s 110,000 sq ft letting at The Barkers Building (Northcliffe House), Kensington.
Shabab Qadar, London Research Partner at Knight Frank, commented: “Stronger levels of transactions from private equity companies at this stage of the cycle suggest rising expectations of growth in the London office market.”
“Larger pools of international capital are targeting grade-A London offices given the attractive yields compared to other European gateway cities. The big investment deals have been driven largely by US investors attracted by the relatively stronger outlook for the London economy and rising occupier demand for best-in-class buildings.”