Central London office investment activity fell 19% last year compared with the long-term average, according to the latest data from Savills.
Investment turnover in Central London totalled £13.5bn in 2022, which Savills said was in line with turnover recorded in 2021. The year got off to a record start with Q1 activity up 360% on the same period in 2021 and 85% above the 10-year average.
However, wider economic issues and political turmoil in the UK saw activity slump in the second half of the year, with just £1.2bn transacting in the fourth quarter – the lowest Q4 volume since 1998.
International investors were the main driver of London activity, accounting for 77% of turnover. Asia Pac investors took the majority share, accounting for a third of investment turnover, followed by US and European investors. In Q4, Middle East investors accounted for 45% of turnover off the back of two transactions.
Savills said availability of core opportunities in Central London had declined almost 60% since their peak in Q1 2022. Conversely, the company said the amount of core plus opportunities had increased significantly and now accounts for more than 50% of available stock.
Richard Garside, head of central London investment at Savills, said: “The start of 2022 demonstrated that demand for Central London offices was as strong as ever, but this quickly changed, driven by uncertainty around both local and global political and economic shocks, giving investors good reason to pause as shown in the Q4 figures.
“How this plays out in 2023 will be defined to some extent by these wider factors and some old school fundamentals of supply and demand. Our investment stock tracker is showing an ongoing lack of best-in-class core assets, suggesting that pricing of these buildings will continue to be cushioned from pressures felt elsewhere in the market as investors are becoming more and more selective.”
