BRE Newsletter 17.05.23

Posted by Chris Littley on 16th May 2023

Market movement

The UK real estate market is still seeing significant investment and development despite wider economic uncertainty. Our confidence in the resilience of the UK market is being driven by continued interest from national and international investors.

1. Central London’s office market revival

The City’s office market has rebounded in the first quarter of 2023, signalling the beginning of a recovery in volumes due to an influx of Asian investment. <Property Week>

2. Record $30.4bn raised for real estate fund

Blackstone has raised a record $30.4bn at the close of the BREP X fund – the largest ever real estate fund raised. <React News>

3. Asian Institution submits plans for 34-storey Shoreditch tower

Endurance Land has submitted a proposal to transform the outdated building at 99 City Road with plans to create a 34-story tower. <React News>

4. Build-to-rent investment recovery

Investment in the UK’s build-to-rent sector has surpassed £1.1bn in the first quarter of the year, with investors attracted by increased rental demand. <React News>

5. UK commercial property sees positive returns for first time since Q3 2022

The UK’s commercial real estate sector shows positive growth, led by an increase in values for residential, industrial and retail. <React News>

Themes of interest

London’s residential market is being affected by wider macro changes which has led to reduced supply, increasing demand and therefore rental growth. The consequence of record rent in Central London is a shift of occupiers to the commuter belt, a target location for our residential strategyThere continues to be discounts available in the Central London office market, with rent premiums being achieved for refurbished and environmentally friendly space. 

6. Crossrail rents prices surge

The new Crossrail link has caused rent prices to jump in areas the Elizabeth Line runs through, as tenants are prepared to pay more for faster connections to London. <The Times>

7. London residential rents have grown for 20^th consecutive month 

UK private residential rents have risen for the 20th successive month, with private rents increasing by 4.9% on average. <Financial Times>

8. London office market sees record number of new leases signed as occupiers target refurbished and environmentally friendly space

Central London office vacancy rate is at 8.6%, slightly ahead of the pre-covid level. Companies seek refurbished spaces in a bid to reduce their carbon footprint and embrace hybrid work. Secondary space is struggling to let. <Financial Times>

9. Record lettings for one of London’s biggest Landlord, Great Portland 

Great Portland Estates has set a record for office leases over the past year, despite the ongoing property market downturn. <Financial Times>

10. Record London residential rents have been hit in Q1 2023

Rents in the capital have topped £2,500 per month for the first time as limited supply drives demand. <Bloomberg>

11. Londoners flee the capital for cheaper commuter belt alternatives

Sky-high property costs are repelling young families and forcing thousands to head away from the capital in search of more affordable investments on the commuter belt. <Financial Times>

12. European office seeing widespread increase in distressed sales

European property transactions have dropped 62% year-on-year creating a discounted buyers market as sellers are forced to fire sale. <React News>

13. Sustainable office buildings are the future for occupiers and investors alike

Old office properties may soon be obsolete as the ongoing shift towards sustainability drives demand for high-quality, refurbished space. <React News>

Notable transactions

Large transactions continue to happen across key industrial, office and residential markets, reflecting international investors’ confidence in the UK real estate market, despite the wider economic difficulties. 

14. Blackstone acquires UK industrial Landlord, Industrials REIT Ltd for £700M.

Blackstone Inc. has agreed to buy UK landlord Industrial REIT Ltd in a £700m deal as their latest bet on European warehouses in one of the largest real estate transactions of the year. <Bloomberg>

15. £315M acquisition of vacant City Office by value-add JV between UK-based asset manager and Japanese equity

Greycoat and Mitsui Fudosan have completed their joint purchase of Sancroft, formerly owned by Goldman Sachs, in a £315m deal, highlighting the continued strength of the London office market on the international stage. <React News>

16. GPE acquires Soho block for £40M 

GPE has agreed to terms in a £40m deal to buy 141 Wardour Street in Soho as a value-added investment in a highly sought-after office investment location. <React News>

17. Hong Kong investor acquires Oxford Street asset for £44M

Hong Kong firm Liu Chong Hing Investment has agreed to pay £44m for Barratt House on Oxford Street, reflecting continued interest in the city for overseas investors. <React News>

18. Zara billionaire family office acquires long-let asset on Foley Street for £83M (4.30% Net Initial Yield)

Spanish billionaire Amancio Ortega has exchanged contracts after the purchase of 33 Foley Street, highlighting continued demand for prime office real estate in London’s prime locations. <React News>

19. £140BN Singaporean investor (ARA) to acquire Regional REIT asset manager

Singaporean titan ARA has made its entry into the European listed market with its acquisition of London & Scottish Property Investment to take on the running of Regional REIT. <React News>

20. Hines acquires £140M Soho office block, Film House

US equity firm Hines has entered into talks with WeWork’s Ark business to buy Film House on Wardour Street, one of London’s target investment locations. <React News>