YEAR TO DATE OFFICE INVESTMENT HITS 13BN - ON PAR WITH FULL YEAR TOTAL FOR 2016
Highest quarterly total for Asian investment on record
London office investment transactions totalled £4.8bn in Q3 2017, representing a quarterly increase of 51% on Q2 2017 and a significant increase on the same period last year when investment levels stood at £3.2bn and £1.7bn respectively. The strong Q3 took the year to date total to £13bn, on par with the total for the entirety of 2016.
High transaction levels were again driven by overseas investors, who for the 16th quarter in a row represented the largest investor group, comprising 94% of total transaction volume. The largest deal of the quarter was the sale of 20 Fenchurch Street (commonly referred to as the Walkie Talkie) by Landsec and Canary Wharf Group to LKK Health Products Group for £1.3bn. This represented the largest single-asset transaction ever in the UK and is the second instance this year of an iconic City tower being purchased by a Hong Kong investor for more than £1bn.
Asian buyers were the largest overseas investor in Q3 2017, transacting £3.2bn and representing 68% of all office transaction volume. This equated to the highest quarterly total for Asian investment on record. Building on the trend evident since the beginning of 2017, large lot sizes once again characterized the market. In Q3 2017, there were 11 transactions over £100m, compared to just five in the same period last year. UK investors dominated the sell-side and represented 65% of disposals in Q3 2017.
We estimate that at the end of Q3 2017 there was close to £39bn of equity targeting London, close to a record high with Asian investors accounting for a significant proportion of this equity. This highlights the continued appetite for London offices among Asian investors who have deployed £6.4bn into office assets so far this year. Pricing has remained firm for trophy assets in the capital and the continued high levels of demand are likely to be satisfied by the availability of stock, especially in the City. If a significant proportion of this stock transacts in the final quarter, investment levels could return to the levels seen in 2013 and 14.