From the continued growth in workers returning back to the office, to discounted prices for prime locations, this month’s news round-up looks at what is driving the high-demand for top-quality assets in London.
We’ve placed the articles into two categories to explore the latest market movement and themes of interest, as well as the most notable transactions.
The last month has seen the continuation of BRE’s previous newsletters, most notably growing interest from occupiers and investors alike in the prime office markets. Moreover, the capital has been named Europe’s number one location for investment in the office and hospitality market. In particular, we’ve seen investors focusing their attention on core locations served by Crossrail in order to take advantage of continued rental growth.
This month has also seen European and North American investors acquiring London based office developers and asset managers – showing long term confidence in the future of the prime market.
BRE sees attractive buying opportunities in targeted London locations which will continue to see rental growth as occupiers migrate from more secondary and less desirable locations. There remains, therefore, a rare opportunity to enter the market whilst the majority of investors are in sell mode.
London named as top European market for hotel investment
London has been identified as the most attractive city in Europe for hotel investments, according to a new study by Deloitte. Nearly 75 per cent of industry figures rated the capital first, ahead of Lisbon and Amsterdam in second and third respectively. (Deloitte)
London economy outperforming New York
The UK capital’s economy is outperforming that of New York in several key areas, including commercial property, employment and public transport usage, according to a new report, making it a prime option for real estate investors. (React News)
Amazon seeks to add 180,000 sq ft of London office space
Retail giant Amazon is said to be in talks for the lease of 180,000 sq ft of office space at The Stage, a mixed-use development in Shoreditch, which will take the company’s office presence in the capital to over one million sq ft when complete. (CoStar)
‘Super prime’ office space is making a comeback
Occupiers are increasingly seeking out the highest-quality office spaces as companies re-evaluate what they want from such assets, and are prepared to pay a premium on rent to secure the best locations. (React News)
West End office rents set to hit £300/sq ft next year
Rents for office space in London’s West End are expected to reach a new high of £300/sq ft by the end of 2024 as banking and finance occupiers lead a trend for larger footprints and prime locations. (BNP Paribas)
Central London office space sees 27% rise in take-up
Take-up of office space in central London increased by 27% in the third quarter of 2023 compared with the previous three months, with an additional 2.6 million sq ft being let, according to a new study. (CBRE)
UK office workers outnumber hybrid employees
The number of workers heading into the office every day has surpassed those in hybrid roles for the first time since the end of pandemic restrictions, with a new study by Hays finding 43% of white-collar workers are now fully office-based, up from 36% last year. (Bloomberg)
UK businesses rethinking office priorities
Occupiers in the UK are reconsidering their expectations of offices in order to compete with hybrid working, with more flexible space and ‘destination’ locations in high demand. (Financial Times)
Living sector set for €23bn investment over next five years
Investors are expected to splash out more than €23 billion (£20 billion) on assets in the living sector over the next five years, with build to rent (BTR), purpose-built student accommodation and senior housing all set for gains. (React News)
UK build to rent sector set to be worth £126 billion by 2028
The UK’s build to rent sector is set to reach a total valuation of £126 billion by 2028, according to a new report from Knight Frank that found soaring demand for homes is driving developers to increase their stock. (React News)
UHNW investors turning to London
Ultra-high net worth (UHNW) individuals are increasingly turning their attention to London’s property market, with 72% of family offices looking to increase their holdings and take advantage of a drop in prices. (React News)
Cadogan Estates surpasses £5bn valuation
The Cadogan estate is now worth more than £5 billion, after the 93-acre site in west London increased its value by 5.1% last year, with the chief executive of the company noting it had benefited from a “flight to quality” among businesses. (The Times)
‘Future bright’ for logistics investment despite recent fall
A recent fall in investments in the logistics sector should not disguise the fact that the outlook remains positive for this class of assets, with take-up over the last year still 10% above the five-year pre-pandemic average. (React News)
Trammell Crow acquires office developer Candour
Trammell Crow Company has completed the purchase of London-based office development specialist Candour as it looks to expand its presence in the UK market, and will take over 850,000 sq ft of in-development commercial projects. (React News)
Brookfield adds $2bn to opportunistic investment fund
Brookfield Asset Management has raised $2 billion (£1.63 billion) in the third quarter of 2023 to bolster its flagship Strategic Real Estate Partners V opportunistic investment fund, which is expected to reach its first close in Q4. (React News)
The last month has seen a number of high-value transactions in the UK real estate market in Bedrock’s primary investment areas – Central London Offices, Multi-Family Residential, and Logistics. Several investors are taking advantage of favourable market conditions to pick up good quality assets with future upside at reduced prices. A marquee transaction this month was the Co-Operative HQ in Manchester, which was sold to a private Middle East investor for £140 million and shows confidence in the regional office market.
Canary Wharf Group, QIA and Brookfield have committed to investing £400 million into Canary Wharf to align the estate with changing demand towards life sciences and much needed residential development in London. Goldman Sachs also invested in London offices in November, acquiring a city development block for £24 million.
Sirius acquires London offices in £33m deal
Sirius Real Estate has completed the acquisition of three north London offices in a deal worth a total of £33.5 million. The portfolio includes two locations in Islington and one in Camden and has a combined area of 103,962 sq ft. (React News)
Tristan agrees financing for Bloomsbury development
Investment management fund Tristan Capital has agreed a deal to provide financing for the development of the 21 Bloomsbury Street scheme, which is due for completion in 2025 and will provide 85,000 sq ft of office space. (React News)
Multiple bids offered for £100m Fleet Street development
A third round of bidding is expected to take place for the former Fleet Street HQ of law firm Freshfields Bruckhaus Deringer after several interested parties made offers in a second round. The property is listed at an asking price of £100 million, representing a capital value of around £400/sq ft. (React News)
Canary Wharf Group secures £400m investment commitment
The owners of Canary Wharf Group, Brookfield and the Qatar Investment Authority, have committed £400 million to the company to support future plans for the estate, including the development of more residential and life sciences projects. (The Standard)
ICG secures £300m for logistics investments
ICG Real Estate has secured a £300 million package of funding for a portfolio of seven logistics assets across the Midlands, which total four million sq ft and include Jaguar Land Rover’s East Midlands campus. (React News)
CBRE completes acquisition of Sovereign Centros
CBRE has completed the purchase of Sovereign Centros, one of the UK’s largest retail-centric asset managers, in a deal that will see it take over the management of over 14 million sq ft of shopping centres. (EG)
Asking price cut for Mayfair development
CBRE Investment Management has reduced its asking price for the sale of Albemarle House in Mayfair, with the firm now seeking £64 million for the office and retail development, which represents a net initial yield of 4%. (React News)
Derwent takes H2 lease sales to £8.5m
Real estate investment trust Derwent London has signed a series of new leases in the capital, taking its total for the second half of 2023 to £8.5 million. This includes the letting of 49,000 sq ft at 25 Baker Street to investment bank Moelis for an annual rent of £4.9 million. (React News)
Brookfield and Copley secure £54m Heathrow logistics deal
Brookfield Real Estate and partner Copley Point Capital have completed the acquisition of three warehouses at London Heathrow Airport in a deal worth £54 million. The assets serve as air cargo logistics hubs for DHL, Circle Express and Air Menzies and are adjacent to the airport’s north runway. (React News).
P3 lands £100m logistics deal
P3 Logistic Parks has agreed a deal in the region of £100 million to buy a 850,000 sq ft warehouse from Tritax Big Box REIT at Midlands Logistics Park. The asset is currently leased to iForce on a 15-year deal, making for a net initial yield of around 4.5%. (React News)
Aviva Investors completes £33m industrial deal
A £33 million deal has been agreed by Aviva Investors for the purchase of a ten-unit industrial estate in south London for £33.1 million. The Triple Two Centre provides 112,000 sq ft of space at an average rent of £13.30/sq ft. (React News)
Japanese developer agrees deal for £250m housing development
Japanese residential developer Daiwa House will be entering the UK market after agreeing a joint venture partnership with Lendlease for a £250 million residential development at London’s Elephant Park. (React News)
Middle Eastern investor secures £140m One Angel Square deal
Manchester’s One Angel Square development has been sold to an unidentified private investor from the Middle East in a deal worth £140 million, making it one of the largest single-asset transactions outside London for several years. (CoStar)
Goldman Sachs and Greycoat set to snap up Finsbury block for £24m
Investment bank Goldman Sachs and partner Greycoat have secured a distressed asset at 20 Finsbury Street for £24 million and are expected to embark on a heavy refurbishment program to improve the quality of the vacant building. (React News)
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.