Good Days And Bad Days: London Office Market Still Has Room For Winners
Parts of the London office leasing market are still seeing big deals, even as the investment market stutters.
Overheated pricing expectations in the London office market may have prompted Norges Bank Investment Management to cancel the £720M sale of the 585K SF 2 King Edward Street, but the same incendiary conditions kindled 400K SF lettings and ignited another £86M funding deal.
It has been reported Norges’ decision to pull the 585K SF sale of the Bank of America HQ came after bidders failed to match expectations. The asking price reflected a yield of 4%.
Whilst the Central London market may have cooled, it hasn’t frozen. On the same day Cain International agreed an £86M development loan with BauMont Real Estate Capital and YardNine for the development of a 95K SF office development at 100 Fetter Lane, in the tech-dominated Farringdon district. The project — named Edenica — is branded as super-sustainable.
The 12-storey development will have an 8K SF roof garden and a ground-floor garden and is targeting the highest environmental standards of BREEAM Outstanding, WiredScore, SmartScore and WELL certifications. Construction is due for completion in summer 2024.
Cain, like many others, is betting that the deepest green office developments stand the best chance of a long, profitable lettings life.
On the same day the debt deal was announced it was confirmed that 100% of the office floorspace at Sellar’s Paddington Square had been let, following 350K SF deals to Capital Group, DS Smith and Kingfisher.
Sellar, on behalf of owners Great Western Developments Limited, said the high-spec scheme called the market correctly during the pandemic, and was reaping the rewards now.
"To be able to announce that the entirety of Paddington Square’s 350K SF of office space has been let, ahead of practical completion later this year, is testament to the quality of the building and its ability to meet occupier demands for future-fit workspace, served by multiple transport options, which include Paddington’s newly opened Elizabeth Line station,” Sellar chief executive James Sellar said.
The first occupiers would move in ahead of the scheme’s practical completion this autumn.
Global investment manager Capital Group will double its floorspace to over 220K SF as part of a relocation from Victoria. Its suite includes a state-of-the-art 150-seat auditorium, a multipurpose event space and multimedia studio capabilities. The workspace will accommodate a planned increase in headcount over the next 10 years.
Paddington Square is a development by Sellar on behalf of Great Western Developments Ltd, a joint venture between Hotel Properties Limited and Anchorage View Pte. Ltd.
In a significant but smaller move, two newspapers owned by Alexander Lebedev will move from Northcliffe House, Kensington, to Indonesian-based investor Sinarmas Lands’ 220K SF Alphabeta Building at Finsbury Square. The Independent and Evening Standard relocate after 34 years sharing the Kensington building with Associated Newspapers, owners of the Daily Mail, Property Week reported. JLL has been quoting rents of £47 per SF on suites up to 19K SF.