South East Office Investment Q1 2023
We have pleasure in providing our Q1 2023 South East Office Market Investment Report.
Q1 2023 saw a total of £641.3 million invested into the south east market. This was in 23 transactions totalling 1.76 million sq ft.
Transaction volumes were impacted by the sale of No 2 Ruskin Square in Croydon to The Pension Insurance Corporation for £267.6 million. This comprised 345,000 sq ft pre-let to The
Home Office, due to complete mid 2024 and accounts for 42% of the quarter’s transaction volumes. If this deal is extracted from the total then transaction volumes for the quarter reduce to £373.7 million in 22 transactions, an average of approx. £17 million per deal.
Based on the £641.3 million transacted in Q1, this is a 49% improvement on Q1 2022 and a 30% reduction on Q4 2022. If you exclude Ruskin Square the quarter is then 13% down on Q1 2022 and 60% down on Q4 2022.
In addition, there is a further £522 million under offer in 24 deals (average deal size £21.75 million).
Funds continue to be the dominant seller of south east offices so far this year.
The evidence for prime yields remaining at 5.6 % was supported by the sale of 2 Sheen Lane in Richmond to Derbyshire County Council Pension Fund c/o Colliers Capital. This comprised 20,000 sq ft fully refurbished and multi-let office building.
In terms of availability there is approximately £1.38 billion on the market in 55 sales.
Investor demand for offices remains thin with many sales failing to reach their asking price and either trading at a significant discount or being withdrawn from the market. The main focus is on better quality town centre offices where there is likely to be stronger tenant demand and prospects for rental growth. Assets meeting this criteria are continuing to attract interest.
We hope you find this research helpful and informative. 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 held within your portfolio.