Private investors gear up for £2.4bn London office spending spree
Private investors and ultra-high net worth individuals are expected to snap up London office assets worth £2.4bn this year, a figure which has jumped by 60 per cent in the past 12 months.
According to research published by real estate agency Knight Frank, the cash rich investment group is expected to be in a strong position to take advantage of the “reduced competition” from larger institutional buyers.
Historically, private investors have accounted for 20 per cent of London office transactions, however Knight Frank predicts this number to rise to 25 per cent in 2023, with private investors having made acquisitions worth £1.5bn in 2022.
Transactions are expected to be dominated by Asia-Pacific-based investors, particularly from Singapore and Australia, who are predicted to allocate £4bn into office buildings in the UK capital, accounting for 42.5 per cent of this year’s expected turnover.
This is followed by European investors, who are expected to add £2.3bn worth of assets to their London office portfolios, and North American investors who are set to snap up deals worth £1.7bn.
It comes after Singaporean sovereign wealth fund GIC last year agreed to buy a 75 per cent stake in British Land’s Paddington Central office complex in London for £694m.
Just this week Hong Kong developer Chinachem Group also confirmed it had purchased Deloitte’s headquarter building for £349.5m.
This is the second London office deal completed by the group in the past four months, following the purchase of the Kaleidoscope building in Farringdon in September 2022 for £158.5m.
“After a period of repricing, we expect deal volumes to recover in 2023, as yields for the very best prime London assets have now stabilised,” Nick Braybrook, head of London capital markets at Knight Frank, said.
“While a wider economic slowdown is expected in the UK, investors are attracted to knowledge and innovation driven economies offering sustainable investments,” he continued.
“This is one of London’s strengths, with its burgeoning life sciences and innovation sectors being a major driver of growth and a strong source of leasing activity. Inflation is expected to peak in 2023 and real estate weightings in portfolios could exceed target levels because of the relative under-performance of other asset classes.”