We are just over midway through 2021 and, while today’s central London commercial investment market is looking more promising than it was last year, still there remain some obstacles to be overcome.
Where the market stands now? Both the key markets have staged a recovery after 2020; city wise market leading the pack: city volume reached £2.99 billion in H1, a 64 percent increase on H1 2020. While, the west end hit £1.55 billion in H1, a 25 percent rise in the same point last year.
Most of this activity took place in Q2 as the UK emerged from its past lockdown. The number of bids received, and the number of assets being marketed have both steadily risen over the last few months. Competitive bidding has resulted in hard prime office yielding to 4 percent in the city and 3.25 percent in the west end.
In H2 two major obstacles were faced. Firstly, the amount of assets being openly marketed. As of early July, approximately £5.9 billion are known to be available on the open market but much of what was tracked in H1 took place off-market, hurting the aspirations of investors who were looking at London but missed to deploy out.
Things seem to be improving as vendors are now showing more confidence in the prospects of liquidity asset as over 20 percent of current available stock was launched during June as indicated earlier. Several of these assets have already received bids or gone under offer.
Secondly, many international buyers are unable to return to the UK market for potential purchases. A consequence of their quarantine restrictions and home nation’s travel as much as the UK’s, this has resulted in the proportion of deals by overseas investors particularly from Asia Pacific – falling this year: Asian investors have accounted for about 13 percent of deals by volume in the west end and 21 percent in the city the year to-date.
Until air travel is resumed, we are unlikely to see these buyers return, until the start of 2022. However, this isn’t an issue unexpected to London, and in fact the UK is ahead of the US in terms of the cross-border investment volume received this year.
So while the signs for the remaining of 2021 are looking good, it will still take a while before we can say the market is normal, but investors have slowly adapted to live with the pandemic – the hurdles they face are more logistic than just deploying capital. Volumes are expected to rise across London over the rest of 2021 and continue to recover in 2022.
