Ultra-high net worth individuals and family offices have acquired £1.3bn worth of London office assets over the past 12 months, according to Knight Frank. Overall, wealthy private investors have been behind 44% of central London office investments over the past year, compared to the long-term historical average of 36%.
With fewer prime assets being listed for sale due to market volatility, cash-rich buyers have acquired £690 million of secondary stock, or "brown" buildings requiring capital expenditure to meet modern workplace and sustainability standards. This value-add investment strategy has seen several repriced office assets sold in defensive micro-locations, largely the West End, to wealthy buyers targeting a higher returns profile through modernisation programmes.
Ultra-high net worth investors from Europe have led activity, accounting for 48% of deals, followed by UK investors, who have been behind 14.4% of all transactions over the past year. With deal values averaging £62 million per transaction, buyers have increasingly targeted smaller lot sizes to complete purchases without having to take on debt.
In the West End, where office vacancy is below the Central London average at 7.1%, investor demand has been especially strong and underscored by transacted capital values 63% higher than asking prices across the city's office market. The West End, with its constrained development pipeline and rising levels of active occupier requirements at 2 million sq ft, registered 56% of all ultra-high net worth and family office investments during the period. This is also due to factors including availability of smaller buildings and the area's attractive real estate fundamentals.
Recent deals across London include Lion Plaza on Old Broad Street, headquarters of law firm White & Case, which was acquired by a southeast Asian private investor client of Knight Frank for a reported price in the region of £260 million. Pontegadea, the investment vehicle of Spanish billionaire and Zara founder Amancio Ortega, also bought the former BBC HQ building at 33 Foley Street in Fitzrovia for a reported £82n.
This summer also saw the family behind luxury footwear firm Manolo Blahnik acquire Mayfair's 31 Old Burlington Street office building for £35m. Another private investor client of Knight Frank from the UK, recently bought the Trafalgar Buildings, located in Trafalgar Square, for a reported price of £47m.
Nick Braybrook, head of London Capital Markets at Knight Frank, commented: "Acquisitions by ultra-high net worth investors reflect their ability to capitalise on reduced prices while also, in many cases, benefiting from a significant currency advantage against a weaker pound. Often, they can fund purchases without taking on debt, putting them in a strong position against institutional buyers, being nimbler in completing transactions.
"On a lot of levels it is now an excellent time to invest in the best London office assets, particularly for cash-rich buyers. Prices have reduced materially in response to increased debt costs, which are likely to ease, but the prime occupational market is showing rental growth and reduced tenant incentives as quality supply has become even more restricted."
Knight Frank's London Capital Markets have recently advised on 55% of all private investor transactions in London, drawing on its global network of ultra-high net worth investors.
Earlier this year, the global property consultancy found that that ultra-high net worth individuals and family offices had set aside £3.4bn to target London office acquisitions in 2023, redirecting capital from other underperforming asset classes.
