London Investment Market has Positive End to the Year

Posted by Colliers on 15th December 2023 -

It’s recognised that traditionally the London investment market surges in the fourth quarter with transactions racing to get finalised before the year-end deadline.  Despite much negative sentiment still prevailing in some quarters, this year is no different.  While October saw only £85 million of assets change hands, the market picked up significantly in November, with £663 million transacting, including 12-14 New Fetter Lane EC4, and a further £1 billion going under offer. At Colliers we are currently advising on over £500 million of deals as a large part of this total. 

November was a busy month for the London capital market, with our figures showing that 50 per cent of all deals currently under offer had terms agreed during this month, most notably, the sale of part of the Langham Estate and our sale of 25-31 James Street WC2 on behalf of Lothbury.  In addition, strong bidding was received for 1 Hanover Square and Blue Star House in Brixton, alongside a total of 16 deals completing. 

This renewed market momentum will come as a welcome relief for many of us, and is hopefully an indication of a more positive 2024 pending.  This is compounded by the expectation that by mid-next year we should see a drop in interest rates due to a reduction in inflationary pressures. 

All of this is good news for the market, finance will be easier to secure and a wider pool of lenders will be open to doing business. The market will also look significantly more stable to our overseas clients. 

The investment market runs hand-in-hand with the occupational market, and demand for the best accommodation in London remains strong with competitive tension putting pressure on top rents. For many, the focus on prime space means that many of the larger requirements in the market are on pause until the new year, as a squeeze on availability begins to bite. In 2023 to date, 72 per cent of occupier take-up has been for Grade A quality product, against the 10-year average of less than 50 per cent. 

For many investors, the focus on Grade A space provides an opportunity for those who are willing to move up the risk curve and undertake intrusive asset management to create best-in-class accommodation. There is also significant opportunity to bring buildings up to better ESG standards, with secondary and poor performing space quickly going out of fashion for occupiers. An example of this was the recent deal in which Mitsubishi acquired 125 Shaftsbury Avenue at the start of December, which will undergo a significant redevelopment to become a sustainable workplace. For those investors who are prepared to take speculative risk, there is a real opportunity in 2024 for value-add and core-plus investment.

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