Google paid £730 million for its Renzo Piano designed office block near Tottenham Court Road in January
(Picture: AFP via Getty Images)Big-ticket commercial property deals including the sale of The Scalpel and investment in the 53-acre Canada Water Masterplan have led to a £5 billion wave of investment in London real estate so far in 2022.
New data from Knight Frank shows that, since the turn of the year, investment in the capital’s real estate has quadrupled compared with the first quarter of 2021.
The value of deals is £1 billion above the average over the past 10 years, according to Shabab Qadar, Knight Frank’s London research partner.
“We’ve seen a continuation of strong investor demand following the typically busy fourth quarter driven by rental growth prospects, a large number of buildings with high environmental ratings, and the clouds of Brexit and Covid-19 being lifted to an extent,” he said.
Notable deals include: Google’s £730 million purchase of its Renzo Piano-designed office by Tottenham Court Road in January; the £1.2 billion purchase of 5 Broadgate; the £718 million acquisition of The Scalpel; and pension fund AustralianSuper’s £290 million deal for 50% of British Land’s 53-acre Canada Water masterplan project.
The surge in activity shows no signs of stopping, with £5.8 billion of central London office deals currently under offer, well above the £4.1 billion value of the remaining stock on sale.
Nick Braybrook, head of London capital markets at Knight Frank, said: “It’s very unusual to have more properties under offer than are currently available to buy.”
The flurry of activity comes as a wider range of investors turn to property seeking assets that offer a secure income. Private equity buyers are shifting tactics from quickly reselling refurbished buildings to long-term ownership of income- generating properties, putting them in competition with institutional owners.
London’s growth prospects, high rents, and its larger pool of buildings with a lower carbon footprint are also driving activity in the city.
Braybrook said London’s 1,078 office buildings with a ‘Good’ or above BREEAM rating, which scores a building’s efforts to reduce its carbon emissions, was more than twice the number available in Paris.
“Office buildings in London with an ‘Excellent’ or ‘Very Good’ BREEAM rating have been shown to achieve sales premia of 10% compared to unrated buildings,” he added.
With new supply relatively limited in the near-term, Qadar expected some of the £48 billion of investor capital targeting London real estate to be put towards so-called repurposing, whereby obsolescent buildings are given a new lease of life often by turning them into mixed-use from single-use.
He added that while hybrid working would remain in some form, demand for office space was buoyant.
“Chief executives were worried about the size of their office footprint but now surveys show that there are no longer a high number of CEOs looking to downsize,” he said. “Our own occupier research shows most CEOs view the office as a strategic device.”
