We have pleasure in providing you with our Q3 2022 South East Office Investment Report.
Q3 saw a total £763m invested into the South East Office market. This was in 43 transactions at an average deal size of £17.75m.
However, the five largest deals of the quarter comprised £411m which represented over half of the total investment meaning that for the remaining 38 transactions, the average lot size was £9.26m.
Transaction volumes were down 11% on Q2 2022 but up 30% on the same quarter last year when the market was still in the grip of the Covid 19 virus.
The Life Science sector continues to attract strong interest accounting for 45% of total investment.
There was a notable reduction in the amount of offices selling for alternate uses such as industrial or residential. This is primarily a reflection on there no longer being as many buildings with existing Permitted Development consent for conversion to residential and also the softening of industrial yields combined with increasing build costs which has made this sector less competitive.
Prop Co’s / REIT’s were the dominant seller, whilst Funds were the dominant buyer.
The recent announcements from the Chancellor and Bank of England will make for an interesting Q4, not just for South East Offices. The immediate impact seems to be that much activity in the market has stalled and investors are approaching the market with a degree of nervousness. That said, there remains good interest in the sector, and whilst a pricing correction is required to reflect the increased cost of debt, there is currently £872m under offer which we will be monitoring. We expect to see improved activity especially from the private equity sector seeking “opportunistic” purchases, as well as the overseas buyers who will be encouraged by the falling Pound.
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 portfolios.