London office investment agents are cautiously optimistic about the fourth quarter following a number of high-profile deals.
Recent big-ticket transactions point to a strong finish to a difficult year for the central London market, with office transactions worth £3bn currently thought to be under offer in the capital.
Schroders’ HQ at One London Wall Place was sold by Brookfield and Oxford Properties to Middle Eastern investors AGC this week for £480m, reflecting a 3.8% net initial yield.
Further west, Canadian firm Cadillac Fairview snapped up White City Place for around £235m, also taking on the asset’s existing debt, which bumped the gross transaction value up to £950m.
As Property Week went to press, the £900m sale of Canada Pension Plan Investment Board’s stake in London Victoria’s Nova to Ara Dunedin was also understood to be on the verge of completion.
A source close to the deal said the three transactions underscored how appealing the London office market remained to investors. “If those three deals are done within a matter of days of each other, I think it will say a lot about the UK, but London in particular, remaining investable as far as international capital is concerned,” he said.
Martin Lay, head of City investment at Cushman & Wakefield, was equally upbeat.
“The acquisitions of White City Place and One London Wall Place clearly underline the attractiveness of London to capital from around the globe and represent an important vote of confidence in the market, which is expected to be the catalyst of further investor activity in the final quarter of the year,” he said.
James Beckham, head of central London investment at CBRE said: “At CBRE we are confident of a resurgent market in Q4. The quarter has started strongly with several significant transactions and we expect to see a number of other prime long-dated income deals which will provide a further boost to investment volumes. All of this helps to determine pricing and confirms that the London market has remained resilient.”
The omens were good for a strong final quarter, agreed Fergus Keane, international partner at Cushman & Wakefield. “We’ve seen £1.6bn worth of transactions in three or four days,” he said. “There have been £5bn of deals done to date in London this year, there’s £5bn available on the market and you have about £3bn under offer.”
Estimating that the year could close on a “not totally disastrous” £12bn, Keane added: “We’ve been waiting for a while for some of the dominoes to start to fall. It’s not a boom market, things are challenging and every deal is hard to do, but we’ve definitely turned a corner.”
Savills’ latest figures show £1.275bn was transacted in central London’s office market in Q3 2020, taking the total invested in the year to date to £4.362bn, down 46% on 2019, when more than £8bn was invested.
Stephen Down, head of Savills’ central London investment team, said: “We’re seeing significantly more activity in central London’s investment market, facilitated by an increase in available stock on what has been a starved market.
“There is a huge wall of global capital looking to find a home and with a significant proportion deriving from property funds and pension vehicles, these investors need to act before the end of the year.”