January 17, 2021

New analysis shows ‘resilience’ of London’s commercial property market

New analysis of commercial property transactions worth £100m-plus completed in London over a 12-month period show a fall in the total value and volume of deals, but the market holding relatively strong in the face of Covid-19 and uncertainty over the UK’s impending EU exit agreement.

The report for the period July 2019 to June 2020, published today (Thursday 26th November) by McBains, a leading construction, property and design consultancy, shows:

  • a fall in the total volume of transactions, with 90 compared to 101 for the previous 12 months (July 2018 to June 2019);
  • a fall in the overall value of transactions, with the total worth nearly £7bn, compared to nearly £10bn for the previous 12 months;
  • no individual transaction broke the £1bn mark, with the highest individual deal being the £608m sale of the Post Building in Holborn; since 2016/17 there had been two transactions a year worth £1bn-plus;
  • the number of deals worth £100m-plus stood at 23, compared with 25 for the previous 12 months– but much lower than the peak of 48 in 2017/18; 
  • in terms of the profile of investors in the deals worth £100m-plus, those from the UK accounted for the biggest share of the market, both in terms of volume (31%) and value (35%);
  • Asian investment has dropped off dramatically: although they were involved in seven of the 23 transactions over £100m, there was a sharp decline in their share of total values (20% compared to 32.6% for the previous 12 months); 
  • US investors’ share increased slightly to 9% of transactions (up from 8%) but their share in the value of investment shrunk from 19% to 12%. 

Clive Docwra, Managing Director, McBains, said: “Given that this report covers a turbulent period including continuing uncertainty over whether the UK will secure a Brexit deal, a general election, and Covid-19 and the Spring lockdown, the London market is proving to be pretty resilient.

“Overall, although the values and volumes of major deals may have fallen, in general commercial property transactions in the capital are holding relatively steady. However, this has been mainly down to UK investors propping up the market as Brexit concerns are still causing overseas investors to be circumspect, so there are still underlying weaknesses.

“The full impact of Covid-19 is also yet to be felt, given that this analysis goes up to June. In particular, as greater numbers of staff work more from home and new ways of working become more ingrained, the demand for signature office buildings may well fall more dramatically over the next year.”