Three landmark investment commitments to London offices from major global companies in January have lifted the market after a muted 2024.
Last week Norges Bank Investment Management, the investment arm of Norway's sovereign wealth fund, confirmed it had signed a joint venture agreement with the Duke of Westminster's property company Grosvenor to explore investment and development opportunities across London's Mayfair and Belgravia.
NBIM paid £305.7 million for a 25% stake in a mixed-use portfolio of predominately office and retail assets around Grosvenor Street and Mount Street in Mayfair. The £1.2 billion portfolio comprises 175 market rent and long-leasehold buildings that Grosvenor will continue to act as asset, property and development manager for. Grosvenor said that it would deploy the funds across the business, including growing its London development pipeline to around £1.3 billion and deploying around £1 billion across its lending platform.
The investment comes after NBIM paid £81 million for an additional 10% interest in The Pollen Estate's mix of offices and retail in London’s West End at the end of last year.
At the end of last week, Broadgate REIT, owned equally by British Land and GIC, confirmed it had formed a joint venture with Abu Dhabi-based holding company, Modon Holding, to develop 2 Finsbury Avenue, the 750,000-square-foot development at Broadgate that is now one-third prelet to US hedge fund Citadel.
British Land and GIC will each retain 25% ownership in 2 Finsbury Avenue through their ownership of Broadgate REIT, while Modon will own a 50% stake in the asset. Details of the pricing has not been disclosed but the project has a gross development value of around £1.4 billion. CBRE and Knight Frank advised BL and GIC while Cushman & Wakefield advised Modon.
Another landmark transaction that the London office market is expecting is a commitment by American bank and asset manager State Street Bank to a major London office move.
CoStar News revealed the global banking giant, advised by JLL, is looking at options in central London with the move increasingly expected to be structured via an acquisition of Helical and Orion Capital Management's 194,000-square-foot 100 New Bridge Street development in the City of London, which is scheduled for completion next year.
100 New Bridge Street is a carbon-friendly office development, very close to City Thameslink and Blackfriars Station and a short walk from Farringdon Station. It comprises 194,000 square feet of offices, with terraces, including a 7,000-square-foot terrace with views of St Paul’s.
The London office market is being lifted by the size of the transactions as well as the credibility and geographic diversity of the buyers, with Middle East and European sovereign wealth money joining North American finance.
Martin Lay, head of London offices capital markets, Cushman & Wakefield, said: "We have already witnessed a number of landmark transactions in the first month of 2025 which is giving greater confidence that global capital flows will be bringing much needed liquidity to support the improving central London office market."
Last year's central London office investment figures were muted mainly thanks to a lack of larger transactions over £100 million. Savills reports that 127 assets transacted in 2024, totalling £4.26 billion in the West End, while the transaction volume for 2024 in the City was £2.27 billion across 84 deals.
It reports that the figures for the City represent a 64% fall in transaction volume compared to the five-year average and is the lowest annual turnover seen in the City market since 1996.
BNP Paribas Real Estate reports that central London investment totalled £9.2 billion last year, with offices making up just under 56% of the total, below the post-global financial crisis average of 70%.
Fergus Keane, head of central London investment at BNP Paribas Real Estate, said that 2024 had been another challenging year with office turnover still circa 60% below the long-term average despite a strong 36% year-on-year increase in volume in the fourth quarter.
Keane said the cost of debt finance has been a significant factor in restricting the market for large lot sizes, and this, as expected, has had a bigger impact on the City.
He added that for entrepreneurial investors looking at larger ticket sizes, the "buyer side window has been elongated due to concerns around market sentiment".
"Now that we’re on the other side of this and in a more positive trajectory, the time to deploy capital is now.”