West End Investment Market
Overview
The West End capital markets had a busy finish to last year, recording £1.06Bn of transactions during Q4 24 either exchanged or exchanged and completed in 32 deals with an average lot size of £35M.
This brought the total for 2024 to £3.75Bn, represented in 106 transactions and an average lot size for the year of £35M. This is higher than 2023 (£3.05Bn) but still falls far short of the previous 5 years’ average of £5.1Bn and 10 year average at £6.5Bn.
Whilst volumes are an easy indicator of market activity, at Allsop we also track the number of transactions. 32 deals in the quarter is the largest total for three years and 106 deals for the year marks a greater than 25% increase on both 2023 and 2022.
In fact, only twice in the last six years have we seen over 100 deals in a year, which signals a wider confidence in the market.
Who is Buying and Selling?
Highlights from the quarter include JP Morgan completing the sale of Times Place, Pall Mall, SW1 to Ares for £135M and 4.3%, and Global Holdings buying two refurbishment opportunities in Soho - 10 Great Pulteney Street, W1 off BooHoo for £49.5M, £1,100 per sq ft, and Frith & Bateman, W1 for around £24M.
The London-focused REITS were buying, with GPE buying two assets for their flex platform, plus Shaftesbury Capital and Derwent London making investments.
Garden Squares continue to be popular – making up a third of the volume - not seen since December 2020 when Allsop advised on the sale of 21 St James’s Square, SW1 and the purchase of 1 St James’s Square for a combined £420M+ - Q4 24 saw Joint Treasure sell 3 St James’s Square, SW1 to US Fund Realty for £126M, c 4% and £2,475 per sq ft and Chinese Estates sell 11-12 St James’s Square, SW1 to Larry Ellison for a reported £162M, £2,000 per sq ft. Both vendors were Asia-based and both US buyers are believed to have bought for part owner occupation. 30 Golden Square, W1 was purchased by L&G from Aviva for £72M, c 4.5% and £2,200 per sq ft.
We are aware of a significant increase in requirements for West End offices, in particular for £20-60M value add, well located freeholds – which are in acute short supply – this money is coming from a wide range of geographies, most notably Israel, UK funds/REITs, private investors and US run opportunity funds. We are also starting to see Australian pension fund money flow into the capital. Asian investors and specifically Hong Kong-based have typically been net sellers, as have UK funds.
Direction of Travel
Capital markets remain subdued across London, however the trajectory is positive, the second half of the year has marked the return of the office investor for the larger lot sizes. We are beginning to see the pricing gap between buyers and sellers narrowing – leading in some cases to assets that have been broadly on the market for the past couple of years, now going under offer as vendors have softened their valuations and buyers perhaps have a stronger case for buying given the stellar rental growth experienced for the right assets. Relatively high build/refurbishment costs remains an issue however.
As we kick off 2025 some of the deals that didn’t conclude in time for Christmas but remain under offer include 20 Manchester Square, Lyric Square, W6, 1 Kingdom Street, Paddington, W2 and 100 New Oxford Street, WC1 – around £600M combined. In all we are tracking around £1Bn of stock under offer. Hopefully a good start to the year. If we see other £200M+ transactions like Paddington then volumes should return to average.