BNP Paribas Real Estate analysis has revealed that Asia Pacific based capital has been leading inward Central London office investment so far this year, as overseas investors take advantage of the strong fundamentals of the market and weakened pound.
According to initial Q3 2022 data, Asia Pacific (APAC) based investment stood at £4.8bn, making up 43% of the total investment volumes into Central London offices year-to-date, eclipsing activity from buyers in the UK (32%), Europe (7%), US (5%) and The Middle East (1%).
The latest forecast from the firm indicates that, despite activity slowing somewhat over recent months, APAC based investment is on course to quadruple versus 2021 where it closed on £1.25bn, by year end.
A total of £3.2bn was invested into Central London Offices in Q3 2022. The year-to-date volume stands at £11.1bn, the highest Q1-Q3 figure since 2019. A number of large transactions in Q3 helped push the average lot size for this year so far to an all-time high of £115m. Completed office developments have reached 2.51m sq ft so far in 2022 (0.45m in Q3). Of 2022 totals, 41.8% has been pre-let.
Fergus Keane, Head of Central London Investment at BNP Paribas Real Estate said, “Despite the challenging market conditions and turbulent economic backdrop, London offices are holding strong versus other core European markets, having already been benchmarked at higher yields than the continent for the last few years in part due to Brexit and costs of debt.
“In the absence of many UK institutions, overseas investors have dominated the market this year, accounting for circa 70% of investment volumes. Against the weakened pound, there’s a lot of investor firepower out there for well-located, core assets, which offer an attractive point of entry, lower vacancy rates and attractive yields.
“Cash-rich high-net-worth overseas investors recognise that London is likely to be one of the first global locations to emerge from the current drift in market sentiment, and are currently circling for opportunities. Asia Pacific investors have been at the forefront of this for most of the year, however, we’re now seeing US buyers, particularly on the private equity side, back in the market with capital to deploy.”
The top deals from Asia-Pacific based capital in 2022 include the £808.5m purchase of 21 Moorfields by TCorp, the £718m purchase of 52-54 Lime Street (“The Scalpel”) by Ho Bee Land, and GIC Real Estate’s £694m purchase of a 75% stake in Paddington Central from British Land.
US investment into Central London offices so far this year (to end of Q3) stands at £522m. The top Q3 deal was the £370m purchase of 10-15 Newate Street by Goldman Sachs (with Greycoat).