London’s land market for commercial and mixed use development was reassuringly resilient in 2020 despite the dual challenges of the pandemic and Brexit uncertainty.

Our analysis shows £2.2 billion of development deals across 39 transactions during the year, up on 2018 and broadly in line with the 40 deals completed in 2019, although volumes were down 66 per cent in terms of value compared with 2019’s total volume of £3.3 billion. 2020 also saw only four deals with a lot size of over £100 million – including Royal Street and Canada Water Dock – compared with 10 deals in 2019. 

However, drilling down a little further reveals 2020, not surprisingly, as a year of two (unequal) parts. The outcome of the December 2019 general election and the prevailing supply/demand imbalance at the time saw confidence grow from investors for central London development opportunities in January and February 2020. While most sales would have begun back in 2019, this confidence certainly contributed to 45 per cent of deals equating to £960 million exchanging in Q1 2020, a 33 per cent increase by volume on Q1 2019.

Thereafter momentum steadily dissipated as the Covid-19 pandemic began to shut down the global economy and international travel. Q2 & Q3 saw just 23 per cent of deals exchange by volume, under half that of the deals done in Q1, equating to just £520 million.

The resurgence in the autumn, as we were briefly allowed out and about, generated a bit of an uptick in Q4, tempered to a degree by an element of investor fatigue as the year closed. This led to a further £698 million being transacted in the final quarter, but this was less than 50 per cent of the volumes for the equivalent period in 2019. Over the year, however, pricing broadly held up well.

50 per cent of 2020’s buyers came from the UK, followed by Europe and North America at 21 per cent and 10 per cent respectively. The ratio was similar in 2019 and 2018. Asian buyers tended to feature on the larger lot sales and, while making up only 8 per cent by deal number in 2020, were closer to 20 per cent by volume. Again, this broadly follows the pattern of the last three years and suggests that the travel limitations of 2020 did not have a major impact on the commercial land market. 

There are positive signs that some of the sales that began in the Q3/4 2020 period will close in Q1 2021 off the back of the good news on vaccines and Brexit. In terms of new stock, there has been an understandably slow start to 2021, with some would-be vendors holding back sites as the current lockdown plays out.

With investor appetite remaining strong, however, and many continuing to look through to post-crisis shortfalls in supply of good quality offices, prices for the best sites will likely remain healthy as opportunities remain relatively few and far between.

Further information 

Contact Oliver Fursdon

Contact Savills Commercial & Mixed Use Development

Land Valuation