UK Commercial Property Sector Poised For Rebound

UK Commercial Property Sector Poised for Rebound
UK Commercial 
Property Sector 
Poised for Rebound 

UK commercial property sector poised for rebound

The UK commercial property sector is on the cusp of significant transformation. Amid shifting economic currents, evolving work patterns and Government EPC regulations coming into force, the market for best-in-class assets shows signs of strength and growing potential.

As interest rates stabilise and the economy navigates post-pandemic realities, investors are increasingly optimistic about the future. With prices alluringly low, the time seems opportune, and for many of the UK’s large commercial investors these green shoots are beginning to drive active investment. With the likes of GPE (Great Portland) announcing a rights issue to raise £350m to invest in the market now, the signs are that investors are beginning to realise that the very best assets in the most central locations are about to see a fresh wave of investor attention.

Stabilising values and emerging opportunities

Despite the challenges posed by fluctuating office demand and regulatory changes, the UK commercial property sector is demonstrating resilience. According to recent insights, the sector’s values are stabilising, with indications that the market may be bottoming out. This bottoming out is crucial as it signals a potential turning point, providing a foundation for future growth.

Industry leaders, such as those at Blackstone, have expressed confidence that the commercial real estate market is finding its footing. With values beginning to steady, investors are reassessing opportunities, particularly in sectors poised for growth, despite broader market uncertainties.

However, while the City thrived, the West End experienced a small downturn in activity, this has been attributed to a dwindling supply. Upon closer examination of the West End, each of its submarkets experienced a surge in Grade A space, averaging a remarkable 104% increase in Grade A, compared to Q4 2022, notably with a threefold expansion in King’s Cross-Euston.

The office sector: adapting to new norms

One of the most debated aspects of the commercial property market is the office sector. The pandemic accelerated the adoption of work-from-home (WFH) policies, leading to a re-evaluation of office space needs. Although this shift posed challenges, it also opened up new possibilities for flexible workspaces and hybrid models.

British Land’s CFO Bhavesh Mistry, quoted by Reuters, reported that across their office portfolio occupancy from Tuesday to Thursday at least is at – or above – pre-pandemic levels. However, demand seems focused on prime central London locations, and superior commercial offerings, with the landlord shedding assets in Paddington, Euston and Canary Wharf.

Landlords and property managers are increasingly focused on enhancing building amenities, improving digital infrastructure, and promoting environmentally sustainable practices to secure the best tenancies. Such adaptations are essential as companies seek to balance remote work with in-office collaboration, driving demand for versatile and innovative office environments. However, with sustainability it is not just meeting a tenant’s expectations that landlords need to concern themselves with – it will very soon be part of Government regulation.

Sustainability and regulatory compliance

A critical factor shaping the UK commercial property sector is the need for compliance with new energy performance certificate (EPC) regulations, with buildings requiring a rating of E or higher.

Whereas previously lower performing assets might have been unappealing to some tenants, requiring landlords to reduce rents to make them attractive, now lack of sustainability compliance will make these assets plummet in value if left as is.

The need for landlords to upgrade older properties to meet stringent energy efficiency standards comes at a cost, but it also presents an opportunity for owners to enhance the appeal and value of their assets – or for buyers to buy low and invest in improvements. Last year Blick Rothenberg found in an annual survey that only 80% or landlords were aware of the need for compliance. This, in the last year, has increased to 100%. Previously where 80% of those surveyed in 2023 didn’t know the cost of improvements needed; this year just 10% are still unsure.

Investment insights and market sentiment

The overall sentiment among investors in the UK commercial property market is cautiously optimistic. With interest rates steadying the cost of borrowing is becoming more predictable, which is essential for planning and investment decisions. This stability is likely to encourage a renewed flow of capital into the sector, with investors seeking to capitalise on emerging opportunities in office space, retail, and industrial properties.

Additionally, prime central London remains a focal point for investment. The city’s diverse economy, robust infrastructure, and global connectivity continue to attract both domestic and international investors. As the market adjusts to new dynamics, London’s commercial property sector is well-positioned to lead the way in recovery and growth.

Published: June 19 2024
Author: Byron Baciocchi

UK commercial property sector poised for rebound

Investing for the next century

Investing for the next century
Investing for the 
next century

Property Investment Commercial Office Westminster

London property has held value for longer than many financial services have existed. It will continue to do so.

Far too much investment discourse focuses on the short term. At Unica Capital, we create investment management strategies that last for decades, and that create generational and family wealth. The best way to read that far into the future is not to chase the latest investment fad – but to look into the past.

It may seem counterintuitive, but explaining the appeal of London property investing is best done by referencing a theory called “The Lindy Effect”.

It holds, loosely, that the longer a non-perishable good like an institution or cultural product has been active, the longer it will survive.

A book that has been in print for 100 years, like The Great Gatsby, is far more likely to be in print for another 100 years, than a book that came out three months ago. A restaurant active for decades is more likely to survive several more decades unlike the new coffee place that opened last week. Unlike humans, these non-perishable goods get stronger with time.

Applying this wisdom to Central London shows you just how valuable property is here.

People have been living near the Thames for millennia. And while the city has changed massively as it has grown, the desire to live and work in proximity to the City is as strong as ever. When Sir Richard Grosvenor obtained a licence to develop Grosvenor Square in Mayfair in 1710 he knew the area was desirable thanks to its position in the developing metropolis. It was, and it still is 314 years later.

And it isn’t alone. Wardour Street in Soho has been an important thoroughfare since the first maps of London were printed. The streets of Westminster had already been fantastically fashionable for centuries when Virginia Woolf wrote about Mrs. Dalloway walking through them in 1925. People don’t just want to work in central London – they want to shop here, eat here, drink here, walk around here, and live here.

Compare this to NFTs. For a few years they had a lot of buzz and consequently some value. Now researchers suggest about 95% of them hold no value at all.

Of course, London isn’t alone as a city with essentially timeless value. Across Europe there are areas with natural beauty or built amenities that people have been placing great value on for centuries – from larger cities like Geneva and Monaco to small towns. Like Gstaad. These are the places where we focus our investment at Unica Capital.

But it’s worth noting that not all London property is built the same, even in seemingly-prime areas.

Canary Wharf is an example of how the Lindy Effect can devalue newer areas. It may have great transport connections and for a while quite a lot of buzz, but in London terms it is incredibly young – the first building was completed in 1992. We’re now seeing that it has not managed to build real amenity value or staying power in those 32 years. Vacancy rates in the London Docklands area are expected to hit 16.6% by Q4 2024. This doesn’t mean Canary Wharf is doomed – but we are simply not seeing that kind of fallback in prime London locations that are more central.

We’re also not seeing it in buildings that embody the old-world London of prior centuries – the heritage-listed property we seek at Unica Capital.

You can apply the Lindy Effect to architectural styles as well as locations. Concrete and glass towers that were all the rage in the 1970s are often losing value now, while classic buildings in Mayfair made up of distinctive red brick with mansard roofs soar – especially when these classic facades are complimented by modern interiors. And since many of those modernist towers have some level of heritage protection, it’s not like you can just unlock the underlying value of the land beneath it: You could well be stuck with something that many people find ugly and little chance of getting planning permission to enhance the property.

Even if you can get planning permission to demolish and start again, doing so will imperil any investment strategy’s environmental credentials. Building a new building involves a lot of “embedded carbon” – emissions from things like steel and construction that simply can’t be avoided when starting from scratch. Offsetting these emissions is possible, but expensive and difficult.

Of course, old buildings don’t retain value without the work of active conservation, which is a huge part of what we do at Unica Capital.

Even the most beautiful buildings lose something if left empty. Indeed, the so-called “most expensive house in the UK” in Knightsbridge currently needs serious renovations after laying vacant for a decade. The right tenants, ones that will sustain your investment and keep the space’s feeling alive, will not settle on a building if it is derelict or dated inside. And they will want modern office conveniences: Showers, kitchens, super-fast WiFi, and bike-parking.

And retaining those environmental credentials will mean making your building energy efficient. This isn’t always simple; but it is far better for the planet than tearing the building down and starting again.

So, you can’t just buy a stake in history and expect to leave it in place to age well. Buildings are not wine. But if you’re willing to do some work to keep it classic on the outside but modern on the inside, it will retain value not just for decades, but for centuries.

Published: May 1 2024
Author: Byron Baciocchi

Property Investment Commercial Office Westminster

Unica Capital Expands Its Swiss Footprint: Acquires Prestigious and Rare Chalet in Gstaad

Unica Capital Expands Its Swiss Footprint: Acquires Prestigious and Rare Chalet in Gstaad
Unica Capital Expands
Its Swiss Footprint: 
Acquires Prestigious 
and Rare Chalet in Gstaad

Gstaad luxury chalet swiss property developer

Unica Capital, renowned for its robust real estate portfolio across London, Switzerland, and Monaco, proudly announces its latest acquisition in the desirable village of Gstaad.

Nestled amidst the beautiful landscapes of Gstaad, famous for its alpine charm and upscale lifestyle, the newly acquired chalet and surrounding grounds occupy over 6,000 square meters. With properties of this quality in short supply, this is another remarkable acquisition for Unica Capital. Set to undergo extensive refurbishments, the chalet will be restored to its prime.

This acquisition seamlessly aligns with Unica Capital’s existing properties in Switzerland, which include chalets in the upscale village of Crans-Montana and luxury villas on the shores of Lake Geneva.

Gstaad, situated in the Berner Oberland, boasts a vast ski area in the Alps with 220 km (137 mi) of slopes. The village’s charming promenade, lined with shops, restaurants, art galleries, and hotels, adds to its appeal. Known for its walking and hiking trails, Gstaad attracts visitors year-round, including famous part-time residents and vacationers like Valentino Garavani, Prince Albert II, Madonna, and Roman Polanski.

Unica Capital’s vision for the newly acquired chalet includes meticulous refurbishments, ensuring modern amenities and exceptional finishes that meet Gstaad’s prestigious ambience.

Stay tuned for updates as we embark on this exciting journey of enhancing luxury living in Gstaad.

Published: April 18 2024
Author: Ricardo Gato

Gstaad luxury chalet swiss property developer

How to tackle the commercial EPC time bomb

How to tackle the commercial EPC time bomb
How to tackle the 
commercial EPC 
time bomb

How to tackle the commercial EPC time bomb

Remit Consulting’s latest figures spell positive reading for the commercial property sector; UK office occupancy levels have hit the highest weekly average since the start of the pandemic.

More and more people are returning to the office which is fantastic news for investors and developers. However, the ticking EPC timebomb presents a major challenge for existing stock and if not defused, we simply might not have a space for all these people.

In short, an Energy Performance Certificate (EPC) rates how energy efficient a building is using a grading system from A to G (with ‘A’ the most efficient grade).

As of April 2023, commercial buildings must meet the minimum EPC rating of ‘E’ or above otherwise they are prohibited from being sold or leased. This is only the first hurdle of a long and challenging race. Before 2027, commercial buildings must have an EPC rating of a ‘C’ or above and this will ramp up to ‘B’ or above in 2030.

Research from FORE Partnership estimates that there are around 6,500 office buildings above 20,000 sq ft in London that are in desperate need of retrofit to meet these EPC regulations, with only around 1-1.5% of existing commercial buildings being retrofitted. Meanwhile research from Savills highlights that over 1 billion sq ft across the UK is below the required EPC ‘B’ rating, further highlighting the size of the challenge at hand.

However, this presents excellent opportunities for savvy hands-on investors and developers to acquire, retrofit and then attract the best commercial occupiers.

Improvements to wall and roof insulation will make a major difference, helping to manage temperatures and reduce heat loss, while replacing inefficient lighting with energy efficient LED options and installing occupancy sensors or timers can help control usage. Another aspect to consider is the installation of solar panels on the roof. This can help generate an electric source resulting in less electricity being used from the grid.

However, all of this doesn’t come cheap. The cost of upgrading an existing building from how it is today to 2030 standards is estimated to be £40 per sq ft – not including normal refurbishment costs, which is more than some buildings can command in rent alone.

To support the retrofitting of existing commercial buildings, investors can access incentives and funding from the UK government. In addition, there are many specialist lenders in the market that offer green loans to finance this area of refurbishment.

With tightening deadlines looming and taking into account the fact that many buildings will need to be made vacant for necessary works to take place, opportunistic investors should be keeping an ear to the ground now for those seeking to offload discounted buildings before they become stranded EPC-failing assets. In this landscape, those with in-house development experience will come into their own.

Published: April 11 2024
Author: Byron Baciocchi

How to tackle the commercial EPC time bomb

The Rise of Soho, London’s Choice for Prime Office Space

The Rise of Soho, London’s Choice for Prime Office Space
The Rise of Soho, 
Londons Choice for 
Prime Office Space

The Rise of Soho -London's Choice for Prime Office Space

Tucked away in the heart of London’s bustling West End lies Soho, a neighbourhood brimming with character, creativity, and opportunity. What was once a vibrant hub for artists, writers, and musicians has now emerged as one of the most sought after locations for businesses seeking prime office space in the capital.

A Historic Haven of Creativity:
In the heart of London’s West End, lies Soho, an area deeply rooted in creativity and entertainment. Starting life as a royal park and developed by Henry VIII, Soho blossomed into a vibrant neighbourhood attracting artists, writers, and musicians seeking inspiration and community. Visionaries like Arthur Lasenby Liberty (the founder of Liberty) and property investment tycoon Paul Raymond left an indelible mark on Soho’s landscape, laying the foundation for its transformation into a dynamic commercial district.

Iconic Buildings and Cultural Landmarks:
RSoho’s streets are filled with iconic buildings and cultural landmarks that speak to its rich heritage. From the spire of St. Anne’s Church to the bustling market stalls of Berwick Street (one of London’s oldest markets dating back to 1778), the area has a timeless charm. After dark Soho plays host to legendary music venues, such as the world famous Ronnie Scott’s Jazz Club and the iconic Marquee Club, where acts like The Rolling Stones and David Bowie played.

Prime Office Space in the Heart of London:
Strategically located in the heart of London, Soho offers unrivalled connectivity and accessibility. With tube stations like Oxford Circus and Tottenham Court Road nearby, commuting to and from Soho is convenient and efficient. Its central location also provides easy access to key London landmarks and attractions, making it an ideal destination for client meetings and networking events.

Amenities and Opportunities:
Beyond its office spaces, Soho boasts a wealth of amenities that cater to the needs of modern businesses. Colleagues can meet clients in trendy cafes, explore the delights of Chinatown or even eat in world-class restaurants. And after work they can enjoy the vibrant entertainment venues that line the streets of Soho, all of which offer endless opportunities for team building and client engagement. From the historic charm of Carnaby Street to the trendy vibes of Old Compton Street, Soho’s streets are alive with energy and opportunity.

Exploring Soho’s Best Streets and Notable Residents:
If you wander through Soho’s streets, you’ll encounter a tapestry of history and culture woven into its fabric. Poland Street, with its storied past and iconic establishments like The Ivy Soho Brasserie, offers a glimpse into Soho’s illustrious history. Meanwhile, Wardour Street bustles with activity, serving as a hub for businesses and creative professionals alike. From literary giants like William Blake to modern-day entrepreneurs, Soho has been home to a diverse array of notable residents who have left their mark on the neighbourhood.

Business Potential in Soho:
With its rich history, prime location, and vibrant community, Soho is the premier choice for businesses seeking prime office space in London. As the UK briefly dipped into recession last year, it is communities like Soho that are driving the UK economy forward.

Real estate investment in Soho continues to thrive, unaffected by uncertainties, emphasising the stability and resilience inherent in the capital’s property market. And is why Unica Capital continues to invest in properties within the area on vibrant streets such as Wardour Street and Poland Streets which blend historic charm with modern amenities, providing prime office spaces tailored to the needs of today’s businesses. These streets are full of historic charm. Poland Street, is famously where poets such as Percy Bysshe Shelley and William Blake once resided, and is a contrast to the vibrant energy of Wardour Street (named after Sir Edward Wardour, an official at the Exchequer). Soho offers a diverse array of options for businesses seeking a prestigious address.

Published: March 18 2024
Author: Ricardo Gato

The Rise of Soho -London's Choice for Prime Office Space

How does a recession affect property investment?

How does a recession affect property investment?
How does a recession
affect property investment?

How does a recession affect property investment

As the UK economy officially enters a recession, the impact on the property market raises questions and opportunities for investors. We take a look at how investors can leverage the market’s nuances to secure profitable investments with long-term returns.

The latest recession
“The UK economy has officially entered recession, figures show,” reports Sky News. This downturn presents both challenges and unique opportunities for property investors.

The current recession echoes historical trends, but not all recessions are created equal. While economic downturns typically lead to financial challenges for individuals and businesses, they also present unique opportunities for proactive property investors and REITs. Understanding the dynamics of the market is crucial for maximising returns and minimising risks.

One of the primary impacts of a recession in the UK, is the fluctuation in property prices on the housing market. Unica Capital believe that a recession is not necessarily all doom and gloom. Pettyson Estate agents agree, “Entering a recession isn’t automatically bad for everybody.” The last major recession, commonly referred to as the Great Recession of 2008-09, saw varying effects across different sectors and locations. Similarly, the 2020 recession, driven by the unprecedented nature of the COVID-19 pandemic, brought its own set of challenges and opportunities. For investors adopting a long-term view of the market, the most pivotal part of any recession is the rate of recovery.

Opportunities for investors
Gladfish, highlights the potential for investors to capitalise on the market’s nuances. “Global economic recessions can bring about significant challenges, but they also present unique opportunities for property investors in the UK,” notes the article. In particular, London has performed far better than any major cities in the US and Europe since the end of the COVID-19 pandemic. And is in a far better position to recover from a UK and wider global recession. By diversifying portfolios and focusing on high-demand areas, and real estate investments with refurbishment or growth opportunities, investors can mitigate risks and capitalise on the market’s potential.

One significant opportunity during a recession is the ability to purchase properties at lower than market value. As economic downturns lead to financial challenges for individuals and businesses, distressed properties often become available for sale at discounted prices. While a downturn can hurt the short-term performance of commercial real estate, it is essential to remember that the market will eventually recover. For investors with liquid capital (such as Unica Capital), this presents a unique advantage to acquire high-quality assets at a lower cost, potentially unlocking significant value in the long term.

Despite the challenges posed by economic downturns, the UK property market has historically shown resilience and the ability to recover. The private rented sector (PRS) tends to be counter cyclical to the sales market. Even during times of uncertainty, rental demand remains robust, providing a stable income stream for investors.

A Long Term Approach
Unica Capital’s commitment to identifying, financing, and managing unmatched real estate investment opportunities positions investors to capitalise on the market’s nuances. With a portfolio comprising prime office real estate across London and international properties, such as long term rental properties in the Alps, Unica Capital offers investors access to high-performing markets with long-term growth potential.

Taking a long-term view is crucial when investing in the property market during a recession. Looking beyond short-term economic fluctuations, investors should consider strategic investment opportunities with strong potential for sustainable growth. Factors such as population growth, infrastructure development, and government policies can significantly impact the market in the coming years, influencing the performance of real estate investment properties.

Despite the challenges posed by global recessions, historical trends have shown that the UK and European property markets, in particular London, often recover after a downturn, making it an attractive option for long-term investment.

What’s next?

As investors navigate through economic uncertainties, maintaining focus, diversifying portfolios, and leveraging investment fundamentals are key. By partnering with reputable real estate investment trusts like Unica Capital, investors can seize opportunities and invest in resilient property portfolios even during recessions.

Published: February 22 2024
Author: Byron Baciocchi

How does a recession affect property investment

Prime Office Investments, An Industry Overview.

Prime Office Investments, An Industry Overview.
Prime Office Investments, 
An Industry Overview.

Unica Capital expands property investment portfolio in Victoria London

The prime office market in 2024 is shaping up for a dynamic year, marked by resilience and growth. As the industry anticipates a positive trajectory, we explore the key trends and factors influencing this sector.

UK’s Prime Office Allure
The United Kingdom maintains its status as the prime strategic investment destination for commercial office spaces, underpinned by the resilience shown since the pandemic. London, in particular, has maintained its position as a magnet for those looking for long-term investment security through sustained prime rental growth. The city’s enduring appeal has consistently drawn property investors from across the globe. Recent data from CBRE’s 2024 European Investor Intentions Survey reinforces this notion, revealing that London is the most attractive city in Europe for investors for the second consecutive year with almost 10% growth compared to Amsterdam (2nd) with 7% and Berlin (3rd) with 6%.

Despite facing ongoing inflationary pressures and global economic fluctuations, London’s resilience has kept investor sentiment strong. The city’s unique combination of economic stability, cultural significance, and robust market potential has consistently supported a positive outlook.

Rising Investor Confidence
REITs that invest in prime offices are increasingly optimistic about the market’s prospects. One significant factor contributing to the buoyancy of the prime office market is the Bank of England’s decision to keep the base rate unchanged. For investors with ample liquidity, this presents a golden opportunity to capitalise on favourable market conditions, making it an exciting time for Unica Capital and other forward-looking property investors.

A view strongly held by Byron Baciocchi, Chairman and Chief Executive of Unica Capital, who stated in a November 2023 Property Week interview, “our own business is on the acquisition trail as we seek to build our portfolio and generate stable returns, looking for both turnkey opportunities but also those where refurbishment and repositioning work can help unlock value.”

The West End drives London’s Prime Office Rental growth
One noteworthy trend in the prime office market is the resurgence of office rentals. London, in particular, has witnessed a remarkable recovery, with prime office rentals surpassing pre-pandemic levels by 3.8%. The West End leads this resurgence, boasting an average rental growth rate of 8.8%. Other areas like Westminster and Victoria are also witnessing substantial growth. Additionally, Soho and Mayfair are experiencing the benefits of their strategic locations, offering connectivity and a wide range of amenities. This is exemplified by recent acquisitions such as Great Smith Street, Wardour Street and Poland Street.

Embracing the Return to Prime Offices
The return to prime office spaces is gaining momentum as businesses emphasise the importance of employees returning to the workplace. Major corporations, including EY, Citigroup, Lloyds Banking Group, and HSBC UK, have introduced policies to encourage office attendance. This shift is indicative of a broader trend toward reoccupying prime office spaces in attractive locations away from the traditional hubs of Canary Wharf to more connected locations like Soho and Mayfair.

Unica Capital’s prime office properties are well-prepared to accommodate a diverse mix of tenants. Some tenants are downsizing as they embrace hybrid working, while larger firms are moving from older headquarters to modern buildings with stronger environmental credentials.

Seizing Opportunities
The prime office market in 2024 offers a wealth of opportunities for investors. Turnkey investments, as well as properties that require refurbishment and repositioning, can unlock significant value in this thriving market.

Investors are drawn to the UK’s prime office spaces, driven by confidence in the market’s potential. Rising rentals, the return to offices, and the evolving needs of tenants all contribute to the positive outlook for this sector. As the industry adapts to changing dynamics, the prime office market remains an attractive and promising real estate investment landscape.

Published: February 8 2024
Author: Alexandre Piechaud

Unica Capital expands property investment portfolio in Victoria London

London Prime Office Market Predictions for 2024

London’s Prime Office Market Outlook for 2024
Londons Prime Office 
Market Outlook 
for 2024

London prime office market outlook for 2024

In the ever-evolving landscape of the commercial real estate market, 2023 was marked by challenges stemming from soaring interest rates. However, 2023 proved to be a year of opportunity for those with liquidity, and with nearly 30% of 2023’s total deal flow happening in December, market sentiment has shifted to a positive outlook for 2024, for some of us at least.

The expectation that the Bank of England would start to lower interest rates in Spring may be premature, given last weeks news of higher than expected inflation. Those waiting for access to cheaper borrowing will have to hold out a little longer. With uncertainty still hanging over the sector, it will be another year of opportunity for investors with liquidity.

Expectations the Bank of England will eventually start to lower interest rates later this year may come too late for some investors. With interest rates now expect to stay higher for longer, the property sell-off will continue for a while at least. As we step into the first half of 2024, the property investment trends set in motion in 2022 and 2023 are expected to continue. Unherd points out, “Keep the lights on until 2025 and wait for the cavalry of easier money and a resurgent economy to appear on the horizon. Until then, amid low occupancy and cash burn from high-interest rates, wait for rates to come down and for people to return to the office and shopping centres.” This situation paradoxically opens up more opportunities for those of us holding cash reserves.

The continued availability of discounted London office deals, as reported by Bloomberg, reflects the pain borrowers and lenders face, but also signifies a golden opportunity for those with liquidity looking to invest in prime office spaces in 2024. With the supply and demand imbalance continuing to be a driving force behind rental growth, as highlighted by CBRE’s Real Estate Market Outlook for 2024, there will be plenty of desirable properties at reduced asking prices continuing to come onto the market. 

This situation is exemplified by the amount of Middle Eastern and Asian investors who have come to the London market during 2023 “Middle Eastern investment into central London offices is the busiest it has been since before the pandemic,” notes research from BNP Paribas Real Estate. This trend has been further reinforced by the words of James Carrington, head of City investment at BNP Paribas Real Estate, who mentioned that “central London commercial investments have become more attractive in recent months to overseas buyers.

With interest rates now expect to stay higher for longer, London is set for an influx of foreign investment, so a word of warning to those dipping their toe into the market. They should not underestimate the importance of knowing and understand the finer nuances of the London real estate market. Contacts and partnerships that have been cultivated over many years put Unica Capital in an enviable position, with the ability to react quickly and secure off-market deals.

Despite the many challenges, London’s economy is adapting post-COVID, with a renewed focus on quality, sustainability and accessibility. Properties like Poland Street, Cork Street, and Great Smith Street which are delivering high quality prime office space in sought after locations are exemplars of this trend.

The return to the office appears to be well underway, as an ever increasing numbers of businesses demand their workforce return to the office at least 2 or 3 days a week. U.S. headquartered companies adopting a return-to-office policy in the UK are leading the way. This ties in with news that office leasing activity in London was at it’s highest level since 2018 – Activity was 93% higher in the second half of 2023 compared to the first half.

News of the cancelled HS2 2nd phase has already affected the market in Manchester and Birmingham. In contrast, London consistently presents itself as a secure option for strategic investment. A prime example of this is news London already outpacing both these cities (and the rest of the UK) on services exports. Between 2016 and 2021, London’s services exports have grown by 47% to reach £152.2bn. Exports from the UK’s second- and fourth-largest services-exporting cities – Manchester and Birmingham – did also grow, but at much slower rates of 11% and 3% respectively. London will increase it’s share of the market if cities like Manchester and Birmingham do not take drastic action.

With demand for well-connected, high-quality prime office spaces in mixed-use locations within London remaining strong for the foreseeable future, and with construction delays and a current shortage of prime stock, it is predicted there will be a shortfall of 13 million square feet of office space in the City of London by 2040, as reported by The Straits Times. This demand highlight the real potential of growth for those with a long-term investment strategy.

Unica Capital predicts that those who have liquidity and the ability to act fast in this market will thrive in 2024. Energy-efficient upgrades attract tenants, location, and quality are paramount, and the ability to adapt and seize opportunities is crucial. While the outlook for 2024 is cautiously optimistic, those with liquidity, and the ability to act swiftly when opportunities arise are looking forward to a busy and productive year. With market sentiment improving, but the expected decrease in interest rates on hold for now, a host of landlords will be looking to offload further assets. Staying vigilant, seizing opportunities as they arise and priming ourselves to capitalise on emerging market trends as they happen will be the key to success in 2024 and beyond.

Published: January 25 2024
Author: Byron Baciocchi

London prime office market outlook for 2024

The Prime Office Market in 2023: A Year in Review

The Prime Office Market in 2023: A Year in Review
The Prime Office 
Market in 2023: 
A Year in Review

London prime office market outlook for 2024

2023 began on a challenging note, with economic uncertainties and rising interest rates casting shadows over the real estate horizon. Yet for investors and REITs with cash, it has been a year of strategic investment opportunity when those without liquidity divested portfolios. Looking at the market as a whole, as we approach the close of the year, there are signs of improvement, offering a glimpse of a market gradually returning to pre-pandemic normalcy in 2024.

The Tough Year:

In 2023, the prime office market was shaped by the complex dynamics of the global economic landscape, which, in turn, were influenced significantly by inflationary pressures.

As the global economy grappled with inflationary forces, central banks have pivoted to a hawkish stance, departing from the accommodative monetary policies of the early stages of recovery. ABRDN’s UK economic outlook, Q4 2023, highlighted that “The hawkish stance adopted by central banks is a strategic response to rising inflation. By tightening monetary policy and raising interest rates, central banks aim to mitigate inflationary pressures and curtail the risks associated with unchecked borrowing and spending.” This departure from the earlier approach reflects a nuanced understanding of the economic landscape, where preemptive measures are deemed essential to maintain stability and counter potential inflationary challenges.

The relentless rise in interest rates has been a defining feature of 2023, posing challenges for investors and developers who rely on funding through borrowing from banks.. This challenging financing landscape has hugely impacted the prime office market. These Developers found it more difficult to secure favourable financing terms, and investors faced heightened uncertainty regarding the returns on their investments. The increased cost of borrowing not only constrained the ability to initiate new projects but also placed existing projects under scrutiny, with financial feasibility and profitability becoming more intricate considerations for those who rely on external financing.

A Year of Opportunity for Unica Capital:

Knight Frank’s London November residential review notes, “Last month’s pause by the Bank of England added to a sense that we have gone through the eye of the storm.” This is backed up by a 14% increase in the number of exchanges in the prime London sales market in Q3 2023 compared with a 5 year average. This temporary reprieve, marked by the halt in interest rate hikes, provides a moment of respite. While the lending landscape remains formidable, individuals and entities with significant liquidity, such as Unica Capital, find themselves in an unparalleled position. As the report states, “Great time for those with liquidity (i.e., Unica Capital) – Can use position to negotiate.” This underscores the pivotal role of liquidity as a potent negotiating tool, enabling strategic players to capitalise on their financial robustness within a market ripe with opportunities.

Office Market Dynamics:

The prime office market is showing signs of recovery, with office occupancy gradually returning to a semblance of normalcy. The industry is at a crossroads, defining its new normal post-pandemic. Demand for central London properties has proven resilient, outpacing the US and Europe, making it an attractive hub for REITs investment.

Continued demand for Central london:

Amidst the challenges and uncertainties of 2023, one notable trend stood out in the prime office market – the demand for central London properties. Positively, the demand in the heart of the UK’s capital remained notably higher than in the United States and Europe. Despite the global economic shifts in investment patterns, central London retained its allure for investors, positioning itself as a resilient and attractive market.

The sustained demand for central London properties can be attributed to several factors. Firstly, the city’s historical significance, cultural richness, and robust infrastructure continue to make it a prime location for businesses and investors. The city’s diverse talent pool, coupled with its status as a global financial hub, has contributed to its enduring attractiveness in the face of broader economic uncertainties.

Throughout 2023 central London has proven to be a stable investment choice for REITs, drawing property investments that contribute to its ongoing prominence in the global real estate landscape. The Central London office rental market, especially in Q3, has exhibited encouraging signs, with data from Cushman & Wakefield reporting a 41% uptick in leasing activity compared to Q2.

In contrast to the fluctuations experienced in the United States and Europe, central London’s sustained demand underscores its status as a haven for property investors navigating the complexities of the current economic climate.

Grade A Driving the Market:

Navigating the complex terrain of the 2023 real estate market, Grade A properties have emerged as the driving force, with rental returns reaching unprecedented heights—a testament to the enduring demand for these premium spaces. In Q3 Grade A spaces have accounted for 70% of the total volume of office leasing. Industry expert Tom Bill, Head of UK Residential Research at Knight Frank comments, “Grade A properties signify the pinnacle of quality and functionality. In times of uncertainty, businesses and investors gravitate towards spaces that offer both prestige and modern amenities.” This underscores the steadfast appeal of Grade A properties, even in the face of broader market challenges.

According to insights from the ABRDN UK real estate outlook Q4 2023, “Investors recognize the intrinsic value of Grade A spaces, viewing them as a safe harbour amidst economic uncertainties. The premium rates signify not just cost but the assurance of long-term value and stability.” This perspective reinforces the strategic choice that Grade A properties represent, best-in-class assets – buildings with low carbon footprints, appealing amenities, alluring locations that attract high occupancy.

Within this competitive landscape, Unica Capital emerges as a key player uniquely positioned to master the intricacies of the Grade A market with the ability to discern opportunities that align with our long-term vision. Unica Capital, has a proactive approach to identifying and acquiring prime Grade A assets, showcasing a commitment to high quality prime office spaces that have enduring value.

Distressed Assets and Off-Market Opportunities:

The current climate presents a unique window for savvy investors to explore distressed assets and off-market deals. In 2023 Unica Capital, has been well-placed to capitalise on these opportunities. Recent acquisitions, such as Poland Street (which recently completed a full refurbishment and welcomes new tenants) and Westminster (currently tenanted by the Secretary of State for Housing, Communities and Local Government), exemplify the company’s ability to identify and secure assets in line with its commitment to excellence.

Long-Term Investment Perspective:

In the face of uncertainties, the focus on long-term strategic investment remains a guiding principle. Purchasing distressed assets and securing off-market deals aligns with a strategy that prioritises stability and growth over time. Unica Capital’s approach underscores the belief that these investments provide a secure pathway in the current market landscape.

As we review the prime office market landscape of 2023, it is evident that challenges coexist with opportunities. Unica Capital, stands in a strong position, strategically positioned to harness the evolving dynamics. In a market seeking stability, the company’s liquidity, strategic foresight, and commitment to long-term investment make it a formidable player and well placed to capitalise in the prime real estate market during 2024 and beyond.

Published: December 8 2023
Author: Alexandre Piechaud

London prime office market outlook for 2024

London’s Surge in Leasing and Investments Signal a Return to Normalcy in 2024

London’s Surge in Leasing and Investments Signal a Return to Normalcy in 2024
Londons Surge in 
Leasing and Investments 
Signal a Return to 
Normalcy in 2024

London's Surge in Leasing and Investments Signal a Return to Normalcy in 2024

In a notable shift toward normalcy, London’s prime commercial property market is demonstrating robust signs of recovery and resilience. The Central London office rental market, especially in Q3, has exhibited encouraging signs, with data from Cushman & Wakefield reporting a 41% uptick in leasing activity compared to Q2. Notably, Grade A spaces have spearheaded this resurgence, contributing to 71% of the total activity. The overall performance in Q3 surpassed the five-year quarterly average by 14%, highlighting a trajectory toward a post-Covid ‘normal.’

This data reports substantial increase in the volume of office space under offer, marking a 22% surge above the five-year quarterly average. Cushman & Wakefield’s data suggests that this trend is poised to continue, with an estimated 60% of the under-offer space anticipated to close by year-end, projecting an annual take-up of around 8.5 million sq ft, aligning with the figures from 2021.

London’s City, in particular, has emerged as a powerhouse, claiming 64% of overall take-up in Q3, amounting to 1.64 million sq ft. This strong performance underscores the city’s resilience and attractiveness to occupiers, defying the broader challenges faced by the commercial property market.

Confidence in London’s market is further exemplified by British Land’s strategic decision to take back an 8 story building near Regents Park once Meta broke its lease. This is despite Meta offering an alternative tenant to take the building, British Land opted to reclaim the space, citing a significant rise in office rents since the original agreement in 2021. British Land has said it expects that rents will grow at the top end of its previously guided range in 2024 across its portfolio. This move underscores the landlord’s confidence in securing higher rents amid the evolving market dynamics.

Moreover, the influx of Asian capital into London’s prime commercial property market serves as a testament to the city’s enduring appeal. High-quality office buildings with strong sustainability credentials have become focal points for Asian investors, reflecting a flight to quality. Despite the challenging macroeconomic environment, London’s resilience and efficient repricing in the property market are attracting strategic investments from Asia.

The ongoing surge in London office development, with a record 5.1 million sq ft of new construction starts, further substantiates the city’s rebound. Deloitte’s London Office Crane Survey reveals a robust development pipeline, including an extraordinary surge in refurbishment starts. With 34 schemes covering 3.3 million sq ft, refurbishments are being propelled by the anticipated tightening of Minimum Energy Efficiency Standard (MEES) regulations, aligning with tenants’ sustainability commitments. This surge in refurbishment activity is indicative of developers’ confidence in meeting environmental standards and fulfilling the growing demand for premium, sustainable office spaces in the capital.

London’s commercial property investment market is on a trajectory to reclaim a sense of normalcy, fueled by a resurgence in leasing activity, strategic decisions by major landlords, an influx of Asian capital, and a robust development pipeline. The signs of recovery are bolstered by confidence in premium office spaces and the city’s enduring attractiveness to global investors.

Published: November 23 2023
Author: Byron Baciocchi

London's Surge in Leasing and Investments Signal a Return to Normalcy in 2024

Get in Touch

This field is for validation purposes and should be left unchanged.

Get in Touch