Total investment into London in 2020 reached £9.45 billion, 25 per cent down on 2019, according to Colliers International. In the submarkets, a year end surge in investment activity saw a total of £4.9 billion invested in the West End during 2020, up 7 per cent on 2019’s figure. In the City and City Fringe the total reached £4.55 billion, boosted by the £2 billion invested in Q4 alone.
The firm notes that the amount invested across the capital in Q4 was £4.05 billion, more than 40 per cent of the year’s total investment activity. The fourth quarter saw the return of overseas investors to the market, accounting for £3.3 billion of transactions, in comparison to the £3.1 billion invested in the first nine months of the year.
In the City and City Fringe, average quarterly deal size surged to £90 million in the fourth quarter compared to just £72 million for the year as a whole. The figure was boosted by Singapore’s Sun Venture acquisition of Land Securities’ £552 million 1&2 New Ludgate and additional deals to AGC (1 London Wall Place - £480 million at 3.82 per cent yield) and Eurazeo Patrimoine (Johnson Building - £170 million at 4.1 per cent).
Dominic Amey, head of City Investment at Colliers International, commented: “The flurry of activity we saw in the last quarter of 2020 is testament to the weight of capital that wants to enter the London market. The current lockdown has put a slight dampener on transactions, but we remain very positive about the demand for investment opportunities and the volumes that could be traded from Q2 onwards. I am expecting this year’s trading volumes to exceed those seen in 2020.”
The Q4 highlight for the West End was the £250 million purchase of 1 St James’s Square by Lifestyle Holdings (Hong Kong). The sale price reflected a 6 per cent premium to asking (£235 million). Equally, the sale of British Land’s Clarges scheme to DEKA for £177 million at 3.51 per cent initial, demonstrates appetite for prime product in core locations.
Guy Grantham, London Research director at Colliers International, added: “There’s no doubt that last year was a difficult one for the London office market, however it is important to recognise that the capital remains attractively priced when compared to its European counterparts. Once the vaccine has been successfully rolled out, global travel opens up and stability arises from the Brexit deal, London will see a real bounce back in the second half of the year as we strive for normality.”
