Agents are working flat out to seal more than £1bn of London office investment transactions before the end of the year.
With 11 working days left in 2023, JLL is tracking 17 transactions valued at £1.09bn that it expects to close before the year is up. This would take the total of investment transactions for 2023 to roughly £7bn, down from £12.2bn in 2022.
Julian Sandbach, head of central London office markets at JLL, said investors are “increasingly realistic about where values lie and have settled on routes to liquidity”. He added: “We are certainly witnessing a desire from parties to close transactions before year end, which was not the case 12 months ago, so we must take that as a positive.”
Landmark deals still to close include the sale of part of Hong Kong real estate billionaire Samuel Tak Lee’s Langham Estate, W1. The 400,000 sq ft-plus Lotus Portfolio came on to the market with a price tag of £500m in August and has been reported to be under offer to Elliott Management and Oval Real Estate.
Other noteworthy deals set to close imminently include the sale of Condé Nast’s Vogue House at One Hanover Square, W1, under offer to developer Johnny Sandelson on behalf of a Middle Eastern investor. The publisher began to lay the groundwork for the move out of the 100,000 sq ft office in March 2022, after six decades at the site. The building was marketed at £70m.
“While this year has been unprecedented, with relatively high costs of borrowing, stubborn inflation and ongoing uncertainty surrounding the nature of office working, we’re still seeing a number of high-profile deals expected to close this quarter,” said Sandbach, noting that the West End has proved busier than the City.
Most deals due to complete in the coming days are smaller lot sizes than the Langham Estate or Vogue House, as the market readjusts to falling values.
Smaller assets still expected to change hands before the end of the year, according to JLL, include 21 Garlick Hill, EC4, for £14m; 35 Soho Square and 13-14 Dean Street, W1, for £15m; 55-61 Charterhouse Street, EC1, for £18m and Hammer House, 113-117 Wardour Street, W1, for £18.8m.
Colliers expects £932m of deals will close over the remainder of the month, while Savills echoed JLL’s prediction for the total number of investment transactions expected this year to reach £7.1bn.
Some agents are optimistic that the new year will see the investment market pick up pace. Christian Capocci, associate director in the London capital markets team at Colliers, said: “Despite the fourth quarter getting off to a slow start in October, the market picked up significantly in November and December. In November alone, £663m of transactions took place with £1bn going under offer.
“This renewed momentum is hopefully a strong indicator for a more positive 2024, set to be compounded by the fact we will see a drop in interest rates and a reduction in inflationary pressures in the second half of the year – all of which will make the market considerably more attractive to both domestic and overseas investors.”
CBRE expects £1.2bn of a £1.7bn under-offer list to spill into the new year, kickstarting a busier 2024. Rob Jackson, head of city investment, said there are “tentative signs of recovery” with “a marked increase in the number of investors monitoring the market”. “Next year is likely to see more activity across London as investors see value in the rebased pricing levels, combined with a positive occupational market supporting rental growth prospects for the best products,” he added.
At BNP Paribas Real Estate, head of City investment James Carrington said the under-offer tally is sitting close to £1.4bn, although he added it is likely many of the tracked transactions will slip into the new year as deal times drag.
Carrington also noted that several other assets may go under offer prior to year end, such as 5 Churchill Place, E14. Savills kicked off a sales campaign for the Canary Wharf office tower in October after it was seized from Cheung Kei Group following defaults on loans. It paid £270m for the 300,000 sq ft block in 2017. FTI Consulting was appointed to oversee the administration in May.
BNP Paribas Real Estate also said assets including Senator House on Queen Victoria Street, EC4, South Molton Estate, W1, and WeWork-owned the Monument at 51 Eastcheap, EC3, could fall under offer before the end of the year.
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