South East Office Investment Q4 2021
We have pleasure in providing you with our Q4 South East Office Investment Report. Q4 saw a total of just over £1.63 billion invested into South East offices in 48 transactions.
This is an impressive 65% increase on the volume of transactions seen in Q3 and almost double the final quarter in 2020. The Life Science sector accounted for 21% of total transaction in Q4 as opposed to the 50% seen in Q3.
Property Companies (including REIT’s) were the most prolific buyers accounting for 50% of the transactions, albeit this includes Segro’s acquisition of the Bath Road portfolio for £425m. This is underpinned by alternate use to data centre or industrial.
The demand from industrial developers seeking older office buildings on large sites suitable for alternate use continues. The latest evidence being Prologis’s acquisition of The Compass Centre at Heathrow for £100m.
Funds were again the biggest sellers, accounting for 67% of all sales.
The closing of the Permitted Development window allowing conversion of offices to residential use had a notable impact as the number of acquisitions by residential developers fell dramatically.
2022 has already seen £107m of new deals exchange, with a further £384m under offer.
There continues to be a general shortage of stock for sale across all size bands, specifically there is a lack of sensibly priced value add opportunities. There is however a strong depth of capital from a variety of buyers including some new entrants which is looking to be deployed. It is notable that there are very few repeat buyers in the market.
Prime yields across the South East remain at 5.50%, the exception being Oxford, Cambridge and the Life Science sector where prime yields are now well below this level, taking account of the strong reversionary prospects.
Please do not hesitate to contact the Bray Fox Smith team to discuss the market in more detail, and we would welcome the opportunity to advise on any specific assets.
