The London office market’s strong underlying fundamentals and pent up investor demand resulted in several deals closing in December, including Allianz £400m purchase of a 75% stake in a British Land portfolio.
There was a notable rebound in activity in Q4, as investors moved to deploy the dry powder amassed during the quieter quarters into assets delivering long-term income opportunities.
According to the latest research from Knight Frank, 2020 saw £9.4 billion worth of deals complete, with December seeing £2bn of investment pour into the market to close the year on a strong and positive note.
The momentum is expected to continue into 2021, with the London office market now having 58% more stock available than at the beginning of last year and greater clarity following the EU trade deal.
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Opportunistic investors will target assets in the City and West End given that London’s office yields outstrip most major European gateway cities.
Nick Braybrook, Head of London Capital Markets at Knight Frank: “Once again London has demonstrated amazing resilience and liquidity in the face of adversity. Despite all the challenges of the year, we recorded close to £5 billion of office investment deals in the final quarter – well in excess of the quarterly average and almost three times the previous two quarters.”
“Clearly, the latest lockdown will dampen some of this momentum, but there are many investors keen to buy into the inevitable recovery early, and last years’ activity leaves much less stock now available.
Faisal Durrani, Head of London Commercial Research at Knight Frank: “Following the pandemic induced slowdown, investor appetite has grown evidenced by the flurry of deals that completed towards the end of December. Despite the UK going into Lockdown 3.0, international investors remain focussed on our market, fuelled in part by the record levels of available investment opportunities.”
“Following news that the UK has secured a deal with the EU and as the UK’s vaccination programme gathers pace, we expect even greater confidence to return to the market. In fact, the heightened demand for London assets has prompted yields to tighten in the City by 25 basis points to 4%, while the West End and Docklands remain stable at 3.5% and 4.75%, respectively.”