Around a quarter of the £9.5bn that will be invested in London office space this year will come from private investors, accounting for a 60% rise from the segment on last year, according to Knight Frank.
A combination of ultra-high net worth investors and family offices that have seen their wealth grow in 2022 and are benefiting from reduced competition from institutional investors, will be responsible for the sharp rise, said the property consultancy.
“The cash-rich investor group, who are generally less reliant on debt to finance transactions, are expected to be in a strong position to take advantage of the reduced competition from larger institutional buyers,” said Knight Frank.
Knight Frank also said in its annual London Report that market sentiment was driven by robust occupier demand for best-in-class offices and prime rental growth.
It said of the £9.5bn to be invested in London in 2023, £4bn would come from Asia Pacific, £2.3bn from Europe and £1.7bn from North America while the overall weight of money targeting London offices is £43.8bn.
Philip Hobley, head of London offices at Knight Frank, said: “London’s prime office assets continue to offer stable rental growth despite a challenging macroeconomic backdrop, as occupiers seek more sustainable buildings that will help them to attract and retain talent.
”We are seeing unprecedented polarisation between ‘the best’ and ‘the rest’, with a shortage of prime office space and a risk of many lower quality, less sustainable assets becoming stranded or obsolete.
“Rising debt and construction costs have further weakened the development pipeline, which will intensify the competition for buildings that offer the best ESG credentials and workplace experience. Even if occupier demand was to moderate in 2023, this would be more than compensated for by a constrained pipeline.”