By Mark Stansfield CoStar Analytics 8 February 2023 | 14:19 London’s office occupier market remained busy in January as occupiers pressed ahead with space upgrades despite growing fears of recession, according to CoStar data. January was the most active month since September and the third-busiest month in the past five years in terms of the number of lettings, based on deals collected by month-end. This measure is used in the analysis to allow for like-for-like comparisons as CoStar researchers continue to collect deals that have occurred in recent weeks. This follows a quiet December, when deal activity slumped to an 11-month low, although the higher proportion of smaller deals meant overall take-up in January was down 8% month-on-month and 51% below a bumper November, when big prelets by law firms Clifford Chance and Reed Smith pushed monthly take-up to a five-year high. Encouragingly, the largest deal last month was an expansion, unlike the Clifford Chance and Reed Smith deals, [...]

Savills Predicts Investment Will Start Slowly and End Strongly This Year in a Reversal of 2022 But Says Around £54 Billion Will Trade Again The fall in UK commercial property prices is nearing its end game but the bottom has not quite been reached, according to Savills. Its latest UK Commercial Market in Minutes report quantifies average yield movements across sectors. Savills says January's yields are a very mixed story, with downwards pressure on parts of retail, stability in logistics and softening in prime office yields. The average prime yield softened to 5.68%, its highest level since 2008. It also means average prime yields have moved out 77 basis points since January last year. The adviser points out that January is always characterised by a lack of transactional evidence, and it expects this to continue through the first quarter of the year. Savills is predicting transactional volumes in 2023 will be a reversal of 2022’s strong start and [...]

By Mark Stansfield CoStar Analytics 6 February 2023 | 7:00 Rising interest rates and cooling investor demand have led to a significant increase in transaction-based yields in recent months, according to CoStar data. The average yield rose across all three main commercial property types in the final quarter of 2022, based on yield observations on deals of £1 million or more. The sharpest outward yield movement was recorded in the industrial sector, the lowest-yielding property type, where average yields rose by 90 basis points quarter-on-quarter to 5.8%. Average industrial yields are at their highest level in two years, with early indications suggesting they have moved out further in 2023. Sub-4% yields, so prevalent in the industrial sector in recent years, have fallen away markedly as the cost of debt has risen, though they have not disappeared completely. A Yodel distribution facility in Hatfield was acquired for £49 million in November, a 3.6% yield, while Abrdn sold a warehouse on [...]

Aparthotel in Former Victorian Tea Warehouse Has 75 Units and Will Continue To Be Operated by Native Places Jastar Capital has acquired London's Native Bankside aparthotel, close to the River Thames, from Create REIT in a deal worth over £40 million. The 75-unit, five-year-old development at 1 Bear Gardens in Southwark has been sold but will continue to be operated by Native Places under a new long-term management agreement that will last 20 years. Those involved in the deal for the former Victorian tea warehouse say it represents the premium being paid by investors for sustainable developments in the capital as the government tightens the Energy Performance Certificate regime, with Native Bankside the UK’s first BREEAM Excellent aparthotel. The property, which is part of the Empire Warehouse, is a short walk from Borough Market and Southwark Bridge, and contains original features of the tea warehouse. It is spread across eight floors and gross internal area of 63,636 square feet, while [...]

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 [...]

By Lisa Dean CoStar Analytics 31 January 2023 | 12:03 London topped the table for take-up as a percentage of stock among major office markets in 2022, closely followed by Bristol and Edinburgh. Finance, legal and technology sectors are seeking top quality space as employees returned to offices. In London, around a third of lettings occurred in 5 Star buildings last year, a record high. In the Big Six regional cities of Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester, 4 and 5 Star-rated offices accounted for over 40% of take-up for a third straight year. Finance and law firms drove activity at the larger end in London, where take-up was equivalent to 3.4% of stock. Blackstone expanded its footprint by pre-leasing 225,000 square feet at Berkeley Square in the third quarter, while other financial firms were largely cutting their footprints. Law firm Clifford Chance later pre-let 328,000 square feet at 2 Aldermanbury Square, though it is downsizing from 700,000 square feet in [...]

WPP's Home at Dorland House and Louboutin's St James's Home Selling M&G Real Estate is in the final stages of selling two offices for close to £125 million, in an early-year filip for London's prime West End investment market. The M&G Secured Property Income Fund is under offer to sell advertising giant WPP's offices at Dorland House in Paddington, West London, for a figure believed to be in excess of £80 million. Market sources said Tokoro Capital, an independent investment manager focused on the UK and Europe, is the purchaser. CBRE is advising on the Dorland House sale process, with the initial price sought of £85 million reflecting a 4.55% net initial yield. The 85,457-square-foot office is on Westbourne Terrace less than 200 yards from Paddington station. It is single-let to WPP until 2035 at a rent of £48.35 per square foot, and part of it was sublet to Future Publishing in 2021. The building has significant alternative use value, [...]