Why big ticket office deals are on the rise
Large office deals in Europe have returned as debates around the office’s future subside
Investors are buying major office properties in Europe’s gateway cities after a pause in trading during the depths of the pandemic.
In London, GBP2.11 billion (US$246.5 billion) of cross-border capital was invested in single asset office deals above €200 million in the first half of 2021, the highest amount for three years, according to JLL data.
In Germany, Allianz Real Estate and Bavarian pension fund BVK bought Germany’s tallest office asset in July, paying €1.4 billion for the T1 development, one of four towers under construction in Frankfurt, where Ampega Asset Management has recently bought the SKYPER office tower.
“Right now, investors are allocating capital to sizeable office assets in major markets,” says Chris Staveley, head of EMEA office investment at JLL. “The market paused to seriously consider the office sector. But demand is high for top quality, amenity-rich and more sustainable buildings.”
A pause in deals during the COVID-19 pandemic came amid practical limitations, such as reduced site visits. But now deals are again completing in part because of strong leasing market momentum that is bolstering investor confidence, Staveley adds.
Looking for more insights? Never miss an update.
The latest news, insights and opportunities from global commercial real estate markets straight to your inbox.
In the Paris region of Ile-de-France, office leasing is up 14 percent year-on-year to 765,600 square metres, according to JLL.
Meanwhile, in London’s West End, the highest quarterly leasing volumes for two years were recorded in the second quarter, according to JLL data. In the City financial district, demand was back to pre-pandemic levels and is 11 percent higher than the district’s 10-year quarterly average.
Occupiers are looking longer term, says Elaine Rossall, head of UK office research at JLL. Across London, more than 4 million square feet of office space is being sought for occupation post-2022.
“That’s clearly a boost in confidence both for the long-term market recovery and for occupiers’ commitment to central London office locations,” says Rossall.
Global capital is once again on the move – but investing large amounts of capital does not automatically make partnering with local asset managers a default strategy, Staveley says.
“There’s a range of strategies at play,” he says. “Partnering up has been an option, particularly for those making debut deals. But at the same time, there’s often a strong inherent sense of familiarity and confidence with the market and in some cases, the asset in question.”
Amid the strong demand, more assets are coming onto the market. In Dublin, the owners of Facebook’s new European headquarters are currently seeking around €395 million for the 31,536 office property. In Amsterdam, bidding is underway on the headquarters of Dutch bank ABN AMRO after the firm announced its decision to sale and lease back the building late last year.
In London, an estimated £4.2 billion worth of office assets were under offer at the mid-point of this year, with a further £6.6 billion of assets available, including several trophy assets on the market at asking prices in excess of £500 million, according to JLL data.
“There’s a strong expectation that as we continue to move from resilience to recovery, more large transactions will take place,” concludes Rossall.
Contact Chris StaveleyHead of EMEA office investment
What’s your investment ambition?
Uncover opportunities and capital sources all over the world and discover how we can help you achieve your investment goals.