By Laura McGuire
London office investment slumped to a 14-year low in the second quarter of the year, new data shows, as high interest rates stifled momentum built up in the early months of the year.
Some £1.2bn was spent on London offices last quarter, a 59 per cent drop on the £2.9bn spent in the previous quarter and the fourth lowest quarterly total in the past two decades, data from Costar shows.
The figures – shared exclusively withCity A.M. – show that the rolling annual amount invested in London offices is now down to £7.5bn, the lowest figure since the depths of the financial crisis in 2009.
A decision by the Bank of England to hike interest rates in efforts to cool inflation played a factor in the slow down in activity.
Scorching interest rates have made investment unattractive as it becomes increasingly expensive for investors to borrow money to build or buy office buildings.
London’s office market is also still adapting to the relatively new world of hybrid work, with many employers carving out plans to cut down on the amount of office space they use.
“While overall activity is subdued, and with little sign of a rebound in the near term, the growing popularity of so-called riskier investments represents a vote of confidence in underlying fundamentals in some parts of the marke,” Mark Stansfield, senior director of UK Analytics at Costar Group, told City A.M.
While activity in the quarter was quiet, the capital’s office market was slightly bolstered by a number of high-profile deals in the West End, which accounted for a record 52 per cent share of the London total in the second quarter.
Major deals include GPE acquiring the vacant 141 Wardour Street site in Soho for £39m and Monaco-based Global Holdings Management buying 55 Tottenham Court Road for £40.3m, both in redevelopment plays.
The West End, which is also home to London’s most significant shopping district, has been growing in demand as customers have been more keen to shop in physical stores as opposed to online post-pandemic.
