GG Capital has bought 9 Upper Grosvenor Street in Westminster for around £8m (€9.3m), while flexible office space provider IWG has bought 73,000 sq ft at One Olympia Building in Kensington. The year 2024 has started after a number of recent transactions, including a deal to lease office space. There is a strong appetite among investors, business owners and indeed tenants for commercial real estate in the right locations.
While a dizzying combination of economic factors, including a period of high interest rates, difficult market conditions, and political uncertainty, may cause some to be skeptical in the short term, nimble investors who can afford to play the long game remain. I’m moving forward in search of opportunities.
According to BNP Paribas research, investment in the central London office market reached £1.6bn in the fourth quarter of 2023, up 54% quarter-on-quarter as investor sentiment improved significantly.
Over the same period, prime office yields remained stable, reaching 4.00-4.25% in the West End and 5.75% in the City of London.
Grade A office lettings accounted for 75% of all transactions in 2023, with demand from occupiers driving rents in the West End to rise to £150 psf, with the city holding steady at £75 per sq ft. Additionally, the study also suggests that super-prime office rents in the West End could double by the end of 2024, creating a great opportunity for active investors who can buy now. .
RSM UK’s latest annual survey of property professionals across the UK revealed that 80% of respondents are optimistic about the property sector over the next three years. Additionally, respondents predicted that the value of UK commercial and residential property would increase by around 3.5% over the next 12 months.
The report also highlights that private equity and international investors are attracted to London as it is considered a safe haven and a globally resilient investment destination. More than 40% of his total inbound investment flows into London.
So where does the money go? International and family office investors continue to focus on prime, established areas in metropolitan areas – the types of areas that come to mind when you think of ‘prestige’, such as Kensington, Mayfair and Soho. From our own experience, reputation, and therefore demand, safety and stability, drives investors’ decisions.
More recently, opportunities to acquire and refurbish underperforming commercial real estate assets have become more common in London. According to research by FORE Partnership, there are approximately 6,500 office buildings in London over 20,000 sq ft that are in urgent need of refurbishment to meet existing EPC regulations and meet London’s ambitious net zero targets. It is needed.
Currently, around 1-1.5% of existing commercial buildings are refurbished, which is significantly below the amount needed to meet the UK’s 2050 targets. These numbers require significant improvement in the near future and present an excellent opportunity for prudent practical investors to acquire, renew and attract the best occupiers.
In line with this, the company has started 2024 on a strong note, expanding its portfolio with the acquisition of 167-169 Wardour Street, Soho, for £11.5 million. The six-story, 13,628-square-foot building features a restaurant on the basement and first floor, with office space on the remaining four floors.
Building on this, we are currently considering a further nine acquisitions, reflecting our confidence in Prime Central London’s foundations.
Fully understand the potential challenges and hurdles that need to be overcome, and the entire cycle, as occupier demand becomes higher and higher, interest rates fall, loans are called in, and distressed commercial assets come to market. Being a smart investor can help you grow in current market conditions. And make the most of the opportunities given to you.
In short, investors who are actively involved in commercial real estate are well aware of the challenges faced with new investments, but the market is in a positive place and conditions will continue to improve. Now is the time to explore and implement your investment strategy with Prime Central London. Also, make sure you strike while the iron is hot, as discounted assets come to market.