Major investments in London office space by ultra-high net worth individuals from Asia, record residential rent levels and big investment into prime City office space are among the most compelling stories from across the sector chosen by the BRE team in this month’s real estate news roundup. We’ve placed the articles in two categories to explore the latest market movement and themes of interest, as well as the most notable transactions.
As demand for UK office space continues to pick up, large institutional investors are continuing to invest into Central London offices. However, it is clear that delivering high-quality, refurbished and ESG friendly assets is required to secure high rents and valuations.
Investors are also targeting the residential sector, as a lack of available housing and high mortgage rates continue to push rents upwards.
Demand for office space surpasses pre-Covid levels
Demand for office space has climbed above levels recorded before the Covid-19 pandemic, with overall interest nationwide nine per cent up on 2019 and Scotland particularly popular. (The Times)
London at risk of office space shortage
An undersupply of prime real estate and a ‘flight to quality’ have been highlighted as reasons for a potential shortage of London office space, but this does present opportunities for investors. (React News)
Almost a fifth of the UK’s office stock is unable to be let due to failure in meeting EPC standards
Almost a fifth of the UK’s office stock is unable to be let as it does not meet minimum EPC standards, with figures from Carter Jonas finding 17 per cent of assets are in bands F or G. (The Times)
Residential rents grow at fastest rate for seven years
The cost of renting has risen at its fastest pace for seven years, with figures from the Office for National Statistics showing a five per cent increase in May and London continuing to lead the way with a 5.1 per cent rise. (Financial Times)
PGIM Real Estate plans to double investment in affordable housing portfolio to £1 billion
PGIM Real Estate has announced plans to double its investment in affordable housing from £500 million to £1 billion, with it targeting a range of acquisitions for the coming years. (React News)
Gap between primary and secondary rents in the logistics market has hit a record level
Data shows Grade A logistic assets have reached an average of £2.40 per sq. ft higher than Grade B. Occupiers are more focused on sustainability and more selective as overall demand slackens (React News)
Industrial portfolio trades rebounded to £2.6 billion in Q2
Industrial portfolio deals recovered from a poor start to 2023 to hit a value of £2.6 billion in Q2 with major transactions including the £235 million Zeus portfolio between NFU Mutual and Barings and Blackstone’s £260 million off-market deal to buy Trafford Park. (React News)
New 285m skyscraper approved for City of London
A proposal to build a new 285-metre tall skyscraper at 55 Bishopsgate in the City of London has been given the green light by planners. The £600 million project will provide office space for 7,000 workers and be the third-tallest tower in the Square Mile. (Evening Standard)
CWG secures £535 million investment for Wood Wharf BTR
Canary Wharf Group (CWG) has secured a £535 million development loan for the next phase of development of its Wood Wharf build-to-rent (BTR) scheme, which will provide funding for the construction of 1,308 homes and 26,300 sq. ft of commercial space. (React News)
Overseas investment continues to flow into the UK real estate markets, driven by strong demand from ultra-high net worth (UHNW) individuals. Historically, big ticket central London office space would be difficult for private investors to acquire, but given the wider economy deterring larger investors at the moment, privates are now active in this space acquiring generational assets , achieving discounts to historic pricing.
Vietnamese investors acquire Lion Plaza in £209 million deal
Vietnamese married couple Maurice Duc Hinh Nguyen and Thuy Thu Ngo have agreed to purchase Lion Plaza in the City of London from German asset manager Quadoro Doric for £209 million, making this the biggest single deal of the year so far in the Square Mile. (Property Week)
Hong Kong capital group snaps up £70 million Watling House
Hong Kong-based capital investment group Goldstone Commercial has agreed terms to buy Watling House, a 95,300 sq. ft office and retail block in the City of London, for £70 million. (React News)
Portland Hospital block sold to One of Asia’s richest families
One of Asia’s richest families has bought a famous hospital block at 215 Great Portland Street. The Cathay Organisation has purchased the property from Lord Sugar’s Amsprop portfolio for around £54 million with an expected yield of 3.89 per cent. (React News)
Singaporean investor acquires 55 St James’s Street for £75 million
Singaporean investor Sun Ventures has agreed to buy 55 St James’s Street in a deal worth around £75 million. The office-led development has an initial net yield of sub-four per cent and is valued at around £2,200 per square foot and will be Sun Ventures’ fourth London property. (React News)
French investor, La Francaise Real Estate Partners set to pay £60 million for Eni House
Eni House, the Belgravia headquarters of Italian oil giant Eni has been sold to French investor La Francaise Real Estate Partners in a £60 million deal. The building is single-let to Eni until 2038 with rent at £58.34 per sq. ft. (React News)
Prague-based logistics firm, P3 enters UK logistics market with £100 million acquisition from Segro
Prague-based logistics firm P3 has made its first move into the UK market with the acquisition from Segro of two assets in the Midlands. The £100 million deal marks the start of an expected £1 billion UK investment by P3 in the short to medium-term. (React News)
Dominus secures ‘trophy’ City location for £27 million
Property investor Dominus Real Estate has snapped up a ‘trophy’ asset at 5-10 Great Tower Street in the City of London for £27.5 million with plans to refurbish it for alternative uses and “breathe new life into the site”. (Property Week)
For further information about any of the insights shared above or to find out more about Bedrock’s Real Estate services, please do reach out: info@bedrockgroup.ch
Author: David Djanogly, Director of Real Estate
This month's news round-up looks at a positive few weeks for UK real estate, with strong activity across the office, retail and logistics sectors, while continued rental rises offer more encouragement for investors.
In July's news round-up, we're focusing on the positive activity in the central London office market as a surge in demand for leasings and strong interest from investors help give the sector a boost.
In June's news round-up, we look at some of the major trends and transactions that are helping demonstrate growing positivity for the London office market and why this is creating new opportunities for investors.