Josh Oliver, correspondent at the Financial Times, has reported this morning (https://on.ft.com/460sq3v) that large London office buildings (valued in excess of £100 million) are proving impossible to sell in the current market as the high cost of debt hampers buyer appetites. This aligns with the view of Andrew Jones, chief executive of LondonMetric, who recently likened office buildings to “melting ice cubes” for investors due to how fast they are depreciating in the current market. A fitting metaphor for this day and age.
These are timely reminders that the office market is fraught with challenges given political, economic and environmental uncertainties. With hybrid working around to stay and Net Zero looming ever closer, tenants will continue to expect high quality, green office space which provide incentives for their workforce to make the commute – all of which require investment and engagement from landlords.
Some are seeing this as an opportunity. Having recently withdrawn sales of some of its larger office buildings, Great Portland Estates is now seeking to raise £350 million to invest in new ‘prime’ real estate across London, particularly in the West End (https://on.ft.com/3WNHRtp). A rare moment of optimism where otherwise the market holds its breath while the Bank of England makes a decision on lowering interest rates later this year.
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