Thank The Yanks, Because Dollars Are Floating The London Office Market This Winter
U.S. investors accounted for 47% of investment of the £2.2B spent on central London’s office market in the last 10 weeks.
Data from Knight Frank suggested a hectic autumn dash as private equity cash pours into the capital’s main office markets. The surge is underpinned by strong leasing activity, the firm says, pointing to 1.4M SF of take-up, with the tech and media sector accounting for 45% of deals.
In the weeks since the start of October, U.S. investors were the most active, responsible for 47% of investment deals (£1B), followed by UK investors who accounted for 29% (£638M) and South East Asian investors comprising 11% of total volumes (£242M).
This follows a busy Q3 for the investment market, which saw £3.8B in turnover in line with long-term average levels. In Q3, European investors accounted for 35% of total volumes compared to 22% from the U.S.
Since 1 October there has been 1.4M SF of take-up over 115 deals. The telecommunications, media and technology sector was a major driver of demand, accounting for 45% of take-up, followed by professional services firms (31%) and financial services companies (9.3%). Demand for best-in-class offices saw 72.8% of take-up concentrated within the prime office market as occupiers prefer newer, better-specified buildings.
Knight Frank estimated total take-up in Q4 will hit 3.1M SF, taking it above the long-term average for the first time since the pre-Covid days of early 2020.
“The big investment deals have been driven largely by U.S. investors attracted by the relatively stronger outlook for the London economy and rising occupier demand for best-in-class buildings,” Knight Frank London Research Partner Shabab Qadar said.
“Stronger levels of transactions from private equity companies at this stage of the cycle suggest rising expectations of growth in the London office market. Larger pools of international capital are targeting grade-A London offices given the attractive yields compared to other European gateway cities.”