Research - JULY 17, 2017

European investors show commitment to London office market in Q2 2017

by Andrea Waitrovich

Europeans were the most active office investors in Central London during the second quarter 2017 for the first time since Q2 2012, according to CBRE.

European investors accounted for 36 percent of all office transactions in Central London, with the largest proportion coming from Germany, as they compete with Asian investors for the best properties. The two largest transactions of the quarter were sold to German investors, including the £485 million ($633 million) sale of Cannon Place to Deka Immobilien and 2&3 Bankside to Deutsche Asset Management for £310 million ($405 million).

For the 15th quarter in a row, overseas buyers were the largest investor group in the Central London market, accounting for an impressive 71 percent of office transactions during the second quarter 2017.

James Hammond, head of West End Investment at CBRE commented: “Appetite from overseas investors for large lot sizes with long, secure income continues to be a key feature of the London market this year and second quarter has proved no different. Pricing has remained firm for this type of building and the high level of stock currently under offer demonstrates how London remains a top priority for global investors. We expect this to translate into stronger transaction levels in third quarter and the final quarter of the year.”

The five largest transactions were all to overseas buyers, highlighting their continued appetite for large lot sizes in the capital. Asian investors represented the second highest proportion of investment making up 26 percent of the total. However, Asian buyers were the largest investors during the first half 2017, having invested a total of £3.2 billion ($4.2 billion) into the capital so far this year.

A total of £3.1 billion ($4.1 billion) was transacted in the second quarter, on par with transaction levels during the second quarter of 2016.  During the first half of 2017, a total of £8.2 billion ($10.7 billion) of office sales were transacted, 13 percent ahead of the corresponding period last year. Once again, investment volumes were driven by large lot-sized deals with 12 transactions of £100 million ($131 million) or more in Q2 2017, building on the momentum of the first quarter 2017 when 13 transacted. By contrast there were only five deals over £100 million in the second quarter of 2016.


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