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