London’s office market has registered £612 million worth of office investment deals during the second quarter of this year.
Of the investment deals completed in Q2, European investors accounted for 35%, whilst domestic investors made up 4%.
Nick Braybrook, Knight Frank Head of London Capital Markets, commented: “With the market essentially closed for nine out of the 12 weeks in Q2, the fall in investment volumes is unsurprising. However, whilst almost £2 billion of deals went abortive at the start of lockdown, investor demand has picked up steadily since and it has soon become an issue of stock availability.
“We expect Southeast Asian capital, having emerged from the pandemic earlier, to dominate initially, but we will need travel restrictions lifted for there to be real depth to demand. Challenges in the debt market will mean a return to dominance of those buyers who can buy all equity, at least initially, with many transactions taking place off market as vendors will be reluctant to openly commit to sell.”
Faisal Durrani, Head of London Commercial Research at Knight Frank, added: “Adding to the complexities has been the shortage of purchasing opportunities. The increased proportion of international investment in the London market and rising number of private investors has impacted the natural cycling of properties as many purchasers buy for a long-term hold. This has driven a rise in interest in refurbishment opportunities. This is especially pertinent in our supply starved occupational market, where almost two-thirds of stock was completed prior to the year 2000. Notwithstanding refurbishments over the last 20-years, there is a lot of dated stock out there, which is where one of the biggest investment opportunities lies.
“Separately, the elephant in the room remains the looming deadline for the government to secure a post-Brexit trading agreement with the EU. Whilst this could in theory undermine demand, London’s safe haven status and proven track record of delivering returns and providing opportunities for wealth preservation are likely to trump any Brexit concerns.”