The City of London is on track for a record first quarter in office investment in 2022, according to Savills latest City Office Watch report, with £3.2 billion assets currently under offer.
The international real estate advisor points to a promising year ahead with assets under offer such as 5 Broadgate, 5 Fleet Place and 90 High Holborn pushing 2022 activity significantly ahead of the next strongest Q1 on record (2007, £2.45 bn) and more than all activity seen in the City in the first half of 2021 (£2.386 bn).
Stephen Down, head of Central London investment, comments: “The sheer volume of offices under offer in the City of London is a strong indicator the Covid-19 ‘fog’ that has challenged the market over the last two years is finally lifting for good. There is strong demand for London, and this is across the board, from the city’s very best office buildings to options for value-add.
“The market will be watching what the North American players who have been dominant in 2021 will do in the year ahead, as ever more opportunistic vehicles come to the fore. As international travel becomes easier we anticipate the return of some Middle and Far Eastern buyers in London that should challenge US investor’s current monopoly on the market and return the breadth of buyer nationality in the City to pre-pandemic levels.”
Reviewing 2021 activity, the Savills research shows December as the busiest month with 15 buildings trading amounting to over £890 million and taking the overall volume for 2021 to £7.72 billion across 91 deals. With North American investors the most active followed by domestic UK investors and European buyers, overall 2021 activity was 68% ahead of 2020 turnover albeit 20% below the 10 year average, mainly due to the UK being in ‘full lockdown’.
The report outlines a theme throughout 2021 was the level of off market activity, with 67% of the total transactional volume in 2021 never being brought to market. Helical’s acquisition of 100 New Bridge Street was a clear example of this. Savills says the key driver for off market activity was undoubtedly a lack of openly available assets for sale.
Another theme that emerged in 2021 highlighted in the report is the number of larger lot sizes transacted. Savills says by year-end there were 24 buildings which sold with a value over £100 million, representing 72% of total transactional volume for the year. This is just short of the 2017 record, where deals over £100 million accounted for 76% of total transactional volume. With many of the assets under offer in Q1 2022 over £100 million this theme looks likely to continue.