Asia Pacific-based capital has led inbound office investment in central London this year as overseas buyers take advantage of a weakening pound, according to an analysis by BNP Paribas Real Estate.
Based on third-quarter data, APAC-based investment stood at £4.8 billion ($5.9 billion) in 2022 to date, making up 43 percent of total investment volume in central London offices, the property consulting arm of the French bank said in a release. By comparison, investors based in the UK made up just 32 percent, followed by those in Europe (7 percent), the US (5 percent) and the Middle East (1 percent).
The firm’s latest forecast indicates that, despite slowing activity in recent months, APAC-based investment is on course to quadruple 2021’s £1.25 billion total by year-end.
“In the absence of many UK institutions, overseas investors have dominated the market this year, accounting for circa 70 percent of investment volumes,” said Fergus Keane, head of central London investment at BNP Paribas Real Estate. “Against the weakened pound, there’s a lot of investor firepower out there for well-located, core assets, which offer an attractive point of entry, lower vacancy rates and attractive yields.”
Strong Q3 Boosts Volume
A total of £3.2 billion was invested in central London offices in the third quarter, bringing year-to-date volume to £11.1 billion — the highest January-September figure since 2019.
A number of large third-quarter transactions helped push the average deal size for the year so far to an all-time high of £115 million, BNP Paribas Real Estate said. Completed office projects reached 2.51 million square feet (233,187 square metres) in 2022, with 41.8 percent of the space having been pre-let.
Keane said cash-rich overseas investors have recognised that London is likely to be one of the first global locations to emerge from the current drift in market sentiment.
“Asia Pacific investors have been at the forefront of this for most of the year,” he said, “however, we’re now seeing US buyers, particularly on the private equity side, back in the market with capital to deploy.”
Lendlease Leads the Pack
The top office deal in central London by Asia Pacific-based capital so far this year is the £808.5 million acquisition of 21 Moorfields — Deutsche Bank’s new London headquarters — by an investment vehicle managed by Australia’s Lendlease on behalf of TCorp, the financial markets partner of the New South Wales public sector.
Other large Asia-led transactions in 2022 include the £718m purchase of 52-54 Lime Street, aka The Scalpel, by Singapore-based Ho Bee Land, and Singapore sovereign fund GIC’s £694 million acquisition of a 75 percent stake in Paddington Central.
The top third-quarter deal overall was the £370 million purchase of 10-15 Newgate Street by Goldman Sachs (with Greycoat) from Shanghai-based Shimao Group.