City & City Fringe Investment Market
Overview
The running total for 2025 equates to £2.45Bn across 62 transactions, which is already £182M (8%) higher than the 2024 annual total with the typically busiest final quarter still to go. The increase in transaction volumes reflects improving market sentiment but remains approximately 35% down on the five year average, with the annual total still likely to fall someway short of the long-term average (£6Bn).
During the quieter summer period, Q3 2025 City transaction volumes reduced by 64% on the previous quarter to £0.402Bn, however, August saw the highest number of deals traded during any of the summer months since 2022.
The average deal size of circa £40M after three quarters of 2025 reflects the steady increase in larger lot sizes trading, with seven £100M + lots having transacted so far in 2025. This is hugely significant when compared to just four £100M+ deals trading in the whole of 2024. There are at least four further £100M+ lots under offer including 70 St Mary Axe, EC3 (Can of Ham) (£340M), Worship Square, EC2 (£185M), 1 Wood Street, EC4 (£130M) and Park House, 16 Finsbury Circus, EC2 (c. £180M).
The largest transaction of the quarter was the sale of 110 Cannon Street, EC4 by a private Hong Kong investor to a private Middle Eastern investor for £72M reflecting a net initial yield of 6.47% and £781 per sq ft. The three-building estate was originally launched for sale in April 2024.
The Bank of England’s Monetary Committee reduced the base rate from 4.25% to 4.00% in August, followed by a hold in September. Whilst the cautious slow and steady pace of interest rate cuts continues, there are signs the debt market is starting to ease up with margins reducing as competition between lenders increases. This will likely encourage further improved market sentiment and increased activity.
We anticipate downward pressure on yields for prime assets but currently prime City yields remain stable around 5.25% - 5.5%. The yield discrepancy between core and non-core assets remains at a historic high.
There remains a lack of newly available product at market pricing with historically low values deterring most landlords from selling unless there is some pressure to do so. However, as sentiment improves, there are increasing examples of vendor’s gaining in confidence to launch end of business plan sales, in what is becoming an increasing competitive marketplace.
Allsop are currently tracking approximately £1.47Bn of transactions which are under offer across 24 deals with 2025 transaction volumes likely to significantly exceed the 2024 annual total. Recent competitive bidding processes for prime assets such as 15 Appold Street, EC2 and 10 Lime Street, EC3 will encourage previously reluctant sellers to bring forward prime value add sales as cheaper costs of capital and UK institutions return to the office market following a long hiatus. We understand that bidding reached c.£67M/ £693 per sq ft for 15 Appold Street, EC2, a substantial repositioning opportunity located adjacent to The Broadgate Estate.
Investor appetite from core buyers remains for prime best-in-class office buildings with strong ESG and sustainability credentials. ESG criteria remains top of the agenda for developers against a backdrop of historically high build costs, with a focus on buildings that can ultimately deliver best in class accommodation. The severely constrained development pipeline has attracted strong demand from value-add investors seeking to capitalise on a strong occupational market with grade A vacancy rates at an all-time low.
110 Cannon Street, EC4
70 St Mary Axe, EC3
Park House, 16 Finsbury Circus, EC2
1 Wood Street, EC4
Who is Buying?
The most prevalent purchaser nationality was evenly shared between European and UK investors accounting for 33% and 31% of total volume, respectively. UK investors completed the greatest number of deals (10) again, compared to European investors (6). Middle Eastern (20%) and North American (16%) investors completed two transactions each this quarter, with no purchases at all by Asian capital. Spanish investors were particularly active this quarter with 3 transactions accounting 19% of the total volume.
The living and hotel sectors remain very active with limited opportunities and significant capital wanting to deploy. Three office to hotel conversion opportunities completed this quarter, the largest being a US hotelier’s purchase of 22 & 24 Southwark Bridge Road, SE1 from Landsec for £29M/ £365 per sq ft. The Freehold 0.4 acre site has resolution to grant planning consent for a 141,459 sq ft NIA office development, but attracted significant interest from hotel, co-living and PBSA developers following a relaxation of planning policy in Southwark making alternative uses more viable.
22 & 24 Southwark Bridge Road, SE1
Owner occupiers continue to be more prevalent than ever seeking to capitalise on historically low pricing and high rental costs. Goat Yard, 20 Queen Elizabeth Street, SE1 was purchased by The Royal College of Anaesthetists for their own occupation for £21.5M/ £723 per sq ft. The 29,748 sq ft former warehouse office building was recently refurbished, and the intention is to occupy the currently vacant two floors in the first instance, with the option to expand into the building upon lease expiries of the other tenants.
French SCPI (Société Civile de Placement Immobilier) funds continued their UK buying spree as they continue to experience strong investor inflows. The UK remains a key target destination for French SCPIs, with new entrant Mata Capital purchasing Notcutt House, 36 Southwark Bridge Road, SE1 for £9.2M/ £737 per sq ft reflecting a net initial yield of 6.62%. The attractive former warehouse building is let to The Boutique Workplace Company for a further 12 years. Income producing assets with historically attractive yields has attracted several SCPIs to London in recent years.
Who is selling?
Landsec are one of the most significant net sellers of London offices accounting for 30% of Q3 2025 volumes across three transactions. In February 2025, the listed REIT and one of the UK’s largest landlords announced its change of strategy to reallocate capital from offices to residential “where the volatility in returns is lower”. Their intention to establish a £2Bn residential platform triggered the sales of 140 Aldersgate, EC1 (£50.5M), Row One (the former Red Lion Court), SE1 (£42.5m) and 22 & 24 Southwark Bridge Road, SE1 (£29M); a total of £122M sales.
There remain several sales which have been triggered by loan events, with the lender applying pressure for a consensual sale, or the property ultimately falling into receivership. Goat Yard, 20 Queen Victoria Street, SE1 falls into this category, being sold by RE Capital to The Royal College of Anaesthetists for £21.5M/ £723 per sq ft.
UK institutional funds seeking to raise capital and/or reduce office exposure through disposing of liquid assets remains a key driver of sales. M&G sold 36 Queen Street, EC4 to Spanish investor Metropolis for £44.13M/ 6.15%/ £943 per sq ft. The prime City corner Freehold provides 46,794 sq ft multi-let office accommodation with a WAULT of 5 years to lease breaks and 7 years to expiries.
Row One (the former Red Lion Court), SE1
140 Aldersgate, EC1
Headline Deals
110 Cannon Street, EC4 was purchased by a Middle Eastern investor for £72M/ £781 per sq ft reflecting a net initial yield of 6.47%, having been originally launched for sale by the private Hong Kong vendor back in April 2024. The 0.6 acre Freehold estate totals 105,670 sq ft of office accommodation across three buildings, the largest positioned immediately opposite the new entrance to Bank Station on Cannon Street. The core plus opportunity is multi-let to 20 tenants presenting either a rolling refurbishment opportunity, or scope to obtain vacant possession in 2028 and carry out a more comprehensive development. We understand interest was closer to £60M following the initial marketing campaign, demonstrating the increase in investor confidence and values over the past 18 months.
Chyene Capital and Stanhope completed a rare substantial office land deal, purchasing Row One, (the former Red Lion Court), SE1 from Landsec for £42.5M which reflects £169 per sq ft on the consented scheme. The 1.24 acre Freehold site benefits from prominent River Thames frontage and resolution to grant planning consent for a new build office scheme of 252,123 sq ft. With build costs and yields at an historic high, office developers have struggled with the viability of land deals, with very few transacting.
140 Aldersgate, EC1 was also sold by Landsec to JP Morgan for £50.5M/ 543 per sq ft in the largest value-add deal of the quarter. The long leasehold interest (105 years unexpired term at 6.50% gearing) is located directly opposite Barbican station and 2 minutes’ walk from the eastern entrance to Farringdon station which benefits from the Elizabeth line. The property comprises 97,187 sq ft and is multi-let with a 2027 block date, at which time the property will be repositioned to capture significant reversion from the current passing rent of £53.32 per sq ft overall. The deal marks J.P. Morgan’s first deal in the City market since 2021 and reaffirms the growing trend of institutional buyers seeking value add offices located close to Elizabeth line stations.
Direction of Travel
Despite the slow and steady approach to cutting interest rates with a maximum of one further cut predicted in 2025, the reduction of margins created by increased competition in the lending market is likely to encourage further transactions.
We anticipate several more £100M+ transactions with three times more likely to trade in 2025 than 2024, assuming those under offer complete. With the velocity of interest rate cuts likely to increase in 2026, we anticipate evidence of a tightening of yields for prime assets over the next 3 – 6 months with clear evidence of values improving already.
There remains pressure on owners who have been able to extend existing loans for the short term. We therefore expect a continuation of sales driven by finance related events as banks lose patience, but also from owners of prime assets buoyed by pricing improvement experienced during recent competitive bidding processes. Value add deals are now trading at historically high capital values due to rental highs.
The £1.47Bn currently under offer suggests there is an increase in sellers and with an increasing buyer pool for larger lot sizes, transaction volumes should step up their pace of recovery into Q4 2025. A buoyant occupational market for best-in-class assets has encouraged the return of private equity investors and UK institutions to the office sector, often a sign of a turning point in the market.
With the macroeconomic picture slowly improving along with a gradual easing of the debt markets, the availability of correctly priced new opportunities will be key in determining the extent of the improvement in investment volumes going into the final quarter.
