Despite London's long established reputation as a global powerhouse and key destination for international capital, it couldn't dodge the 2022-23 market turbulence, causing a 49% investment drop.
High borrowing costs impacting on investor confidence led to a global real estate investment decline. Deals over £100 million, which are crucial for driving investment volumes, suffered most during the downturn. These buyers often rely heavily on leverage, but rising interest rates made financing less attractive, reducing such trades.
Despite the downturn, some investors eye a rebound, with Blackstone's recent £230 million purchase of 130-145 New Bond Street potentially reigniting big deals. Could now be the time to capitalise on the market's recovery – we’ve analyse some key drivers:
Capitalising on Market Dynamics
The data paints a stark picture: in 2023, the number of deals exceeding £100 million in Central London fell by 51% compared to the previous five-year average and 60% compared to the previous ten-year average. In the £150 million-plus bracket, the decline was even more pronounced, with a 59% drop in the City and 83% drop in the West End, compared to previous 10-year averages. These statistics underscore a market ripe for disruption, presenting investors with a unique opportunity to capitalise on reduced competition and favourable valuations.
Harnessing Historical Insights
History serves as a valuable guide for navigating future trends. Drawing parallels with past market downturns such as the aftermath of the Global Financial Crisis (GFC) underscores the cyclical nature of the market and the rapid rate of recovery of liquidity for larger lot sizes after a market shock. As shown in the chart below it took 12 months from the low point in 2008 for the number of larger transactions to start recovering and just a further 24 months for levels to return to pre-GFC levels.