Over the last month we have seen more evidence of a shift towards prime central London office space, with some of the biggest leasing deals of the year taking place. In particular, it has been a busy month for office lettings, with several large institutions taking leases on new premium office space in London.
This news round-up explores the latest market movements and themes of interest, as well as the most notable transactions taking place in the UK Real Estate market.
London commercial office space continues to be in high demand as firms pivot away from home working, with employees return to offices at the fastest rate since the Covid-19 pandemic. However, with many employees still desiring hybrid working, firms are seeking the most desirable spaces in order to entice workers back, which presents great opportunities to landlords with the highest-class assets.
On the residential front, the combination of a shortage of supply and record demands from rental tenants continues to exacerbate the market. The result of this is that rents are continuing double-digit growth and reaching record levels – the average monthly rent for residential properties in London has reached more than £2,100 as demand among renters continues to significantly outstrip the supply of homes in the capital. (Bloomberg). While the shortage of housing stock in London is means that more than 11 per cent of residential properties in the capital are now overcrowded, according to new data from the Office for National Statistics. (Bloomberg).
Shaftesbury Capital benefits from high West End demand
London landlord Shaftesbury Capital is benefiting from high demand among businesses for space in the West End, with shops, bars and restaurants in the theatre district all seeing strong earnings in the first half of the year. (The Times)
Aviva sees new buying opportunities in ‘distressed’ property market
The UK’s largest property investor Aviva Investors has forecast strong buying opportunities in the coming months as it looks to take advantage of a “distressed” environment to pick up assets at a discount. (The Times)
Zoom become latest name to join return to office trend
The trend of companies ending home working options and ordering staff to return to the office has been emphasised as video calling app Zoom becomes the latest big name to mandate its employees spend more time on site. (The Telegraph)
Central London set to avoid US ‘doughnut’ trend
New research has predicted that London is unlikely to follow the trend of several US cities, which have seen businesses move away from centrally-located offices to form a doughnut-shaped ring in the suburbs. (React News)
West End sees boost as investors target core London markets
The West End of London currently has over £1 billion of deals under offer as property investors show high interest in the capital’s core market, with over $4.1 billion of office stock currently available. (Property Week)
UK workforce growth outpaces office availability
Demand for office floorspace in the UK is now outpacing the supply of available commercial inventory by seven times, largely due to a 4.5 per cent increase in the country’s workforce since 2016 – the equivalent of 1.2 million extra employees. (React News)
AEW introduces £100m investment fund
Real estate investment manager AEW has announced the creation of a new UK-focused Impact Fund, with an initial seed of £100 million of assets transferred from its existing funds, including specialist supported living, key worker accommodation and care homes. (React News)
Howard de Walden sees income return to pre-Covid levels
Rental incomes across the Howard de Walden estate have bounced back to highs not seen since before the Covid-19 pandemic, with the landed estate reporting a 9.2 per cent growth in rental income to £147.8 million for the year to the end of March. (React News)
It has been a busy month for office lettings, with several large institutions taking leases on new premium office space in London. A key theme in many of these lettings has been a shift from secondary to prime markets, again reflecting the push towards quality that has been evident in the office market post-pandemic. A trend we expect to continue for the foreseeable, providing opportunities for Landlords.
We have seen several notable purchases from high-end investors based on both sides of the Atlantic, with the likes of Valor, Blackstone and GPE all expanding their UK portfolios.
GPE secures Soho Square Estate in £70m deal
Great Portland Estates (GPE) has confirmed the acquisition of the 57,400 sq ft Soho Square Estate in a £70 million deal. The group reportedly plans to develop a new headquarters at the estate. (Property Week)
Realty Income seeks to purchase £300m of British Land assets
British Land is in talks with US investment group Realty Income for the sale of up to £300 million worth of UK assets. The proposed portfolio includes six London-based data centres and offices, as well as retail parks in Milton Keynes, Inverness and Peterborough. (The Times)
NY law firm selects former Daily Mail office for London HQ
New York based law firm Debevoise & Plimpton are in talks to take c. 80,000 sq ft office space in the City of London for its new UK headquarters. The space, formerly used by the Daily Mail, is part of The Northcliffe, which is being completely refurbished. (React News)
Valor acquires £146m London Logistics Estate
Valor Real Estate has agreed to buy the Tera 40 industrial estate in Greenford, west London from Lothbury Investment Management in a deal worth £146 million. The 19-acre estate includes four fully-let modern distribution assets totalling 340,650 sq ft. (React News)
Arbuthnot Latham takes 75k sq ft City Office HQ
Private and merchant bank Arbuthnot Latham will be moving its HQ to a 75,000 sq ft space at 20 Finsbury Circus in the City of London, agreeing a 15-year lease at an average rent of £68 per sq ft. (React News)
Blackstone acquires £105m industrial portfolio across UK
US private equity firm Blackstone has continued its expansion into the UK logistics sector with the £105 million off-market purchase of three recently constructed warehouses in the South East with a total area of around 380,000 sq ft. (React News)
Capgemini to lease 90k sq ft of Midtown office space
Consultancy and IT firm Capgemini is set to move its London HQ from 40 Holborn Viaduct to the Selso building at 95 Queen Victoria Street, where it has agreed to lease the entire 86,142 sq ft of available space. The building is owned by the J Safra Group and is currently undergoing a full refurbishment that is scheduled for completion in early 2024. (React News)
Acrisure agrees let for new City offices
US insurance and fintech firm Acrisure has agreed a prelet deal for almost 51,000 sq ft of space at M&G Real Estate’s 40 Leadenhall development in the City of London. The deal means the building has now reached 70 per cent occupancy ahead of its scheduled 2024 completion. (React News)
Moelis & Company to relocate to new Baker Street HQ
New York-based investment bank Moelis & Company has signed a deal to move its UK headquarters to Derwent London’s under construction 25 Baker Street development, with the company set to take up 49,000 sq ft of office space at a rent of around £100 per sq ft. (React News)
UHNW individuals spend £1.3 billion on London office space
Ultra-high net worth individuals and family estates have bought up £1.3 billion in London office space in the last year, according to new data from Knight Frank, with retail billionaires, sports stars and shipping magnates among those investing in the capital. (React News)
Private investor buys Snapchat HQ in £240m deal
A private investor has purchased the London headquarters of social media company Snapchat in a deal worth around £240 million. The off-market sale of the 146,000 sq ft Bloom development in Clerkenwell provides a vote of confidence for the London prime market. (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.