There is circa £41bn of international investor ‘dry powder’ targeting central London offices and retail assets this year, according to BNP Paribas Real Estate.
The company compiled the figure, which calculates the estimated total capital waiting to be deployed into the market, based on analysis of completed and pending deals, in addition to its own market intelligence gathered through its global network and private banking platform.
According to BNP Paribas Real Estate, there is currently a ‘triple-tiered buyer landscape’ consisting of investors looking for ultra-prime ESG assets that suit long-term buyers and tenants seeking out the best green buildings; opportunities to upgrade less fit-for-purpose buildings in a yield play; or obsolete stock in a repurposing play to secure operational returns that the likes of a residential or a hotel asset can provide.
Fergus Keane, head of central London investment at BNP Paribas Real Estate, said: “It’s penalty time for international investors looking at London and they have until the summer to convert. The market is all about relationships at the moment, and there are more fireside chats than ever happening around pricing, in an effort to bridge the dichotomy on pricing between vendors. Investors are armed with significant capital expenditure, around £41bn, for office and retail assets, but they are seeking values ideally at around 75-80% of last year’s pricing in what we identity as a three-tiered landscape.”
BNP Paribas Real Estate’s initial Q1 2023 data shows central London investment activity is returning to ‘relatively normal levels’ with deals worth at least £2.5bn expected to complete by the end of March – this would be a 182% increase on the £0.9bn that transacted in the final quarter of last year.
