HG's Central London investment team talks market insights, successes & inspirations

The team: Simon Beckett (SB), Guy Harris (GH), Simon Hall (SH), Rich Alsop (RA)

What's your take on the Central London investment market right now?

SB: I’ve worked through two or three serious troughs in the market now: this one feels more multi-faceted than the others, being overlaid with serious geo-political uncertainties. Interest rates ought to stabilise this year but world events still look unpredictable and could have an effect. It’s clear that offices now also face structural challenges from which there’ll be winners and losers, with new work patterns and environmental standards likely to weed out owners who fail to invest.?

RA: Multi-faceted sums it up well Bucks! If not distressed, then we are certainly seeing stressed borrowers. Those that can plug financing gaps will, others will have to sell. Pricing is of course key but there are plenty of buyers for the right product. We saw a few prime deals last year and there are some ongoing which could look like exceptional value in a few years’ time.

SH: Despite these headwinds, I think there’s now light at the end of the tunnel. Inflation is coming under control and there will be pressure on the Bank of England to reduce interest rates towards the middle part of the year.?Five-year SWAP rates are already reducing and a number of investors, especially from overseas, are already starting to dip their toe back in.?There is high demand for best-in-class and prime West End opportunities.?Pricing for more value-add opportunities is dictated by location and will take longer to recover as ESG/MEES regulations, on top of build cost inflation, bite into returns.

GH: I am excited about the changes we are seeing across the London investment and leasing markets. Covid, serviced offices and the sustainability agenda have forced businesses to think hard about how they occupy offices and the quality of space needed to encourage staff back to the office. This should not only lead to greater investment into the quality of offices, but also encourage repurposing of surplus properties.

Increased interest rates and high build-cost inflation has helped drive a rebasing of pricing. This has already presented some interesting opportunities for investors, particularly in the West End, and there will be a limited window to capitalise on this.

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What will be the biggest disruptor in the next 5 years that agents and investors should be preparing for?

SB: WFH and ESG. Agents need to understand what spec lets space and ticks all the environmental boxes. We have to understand how to retro-fit old buildings, understand the latest technology and where to source it.?

GH: In addition to this, I would add placemaking and transport connections. With the shift in working habits, occupiers are focusing on the key drivers to encourage staff back to the office and the local amenity offer is a vital part of this. For this reason the West End is leagues ahead of other sub-markets with its F&B and retail offer combined with the open spaces of Regents Park and Green Park.

Who are the key movers and shakers in the market right now?

SB: It will take time for investors to adjust to the new debt environment and until that happens, wealthy cash investors can pick up good properties at higher yields (than 2021). Liquidity for large lot sizes is limited but this year we could see greater liquidity through forced situations as more refinancing filters into the system. Banks will be reluctant to force situations with good income streams, but short-leased stock and development sites could come under pressure.?

GH: The core West End sub-markets continue to have strong appeal to private investors. Institutions with cash and limited leverage have a rare opportunity to buy core London deals, and for the right buildings in the best locations they should take advantage.?Private equity is also circling for deals as evidenced by the Langham Estate and Charlotte Street Estate.

RA: Luxury retailers will continue to grab headlines with strategic acquisitions on Bond Street, as they are in New York and Paris. Away from these special purchaser situations, European high-net-worth individuals are generally leading the way, as the Hong Kong families who have driven the previous cycle take a back seat. ?We’re moving into an interesting phase as the major repricing of retail or retail-led, mixed-use assets is attracting a new investor pool. Private equity money and buyers, who may not have previously considered the sector, are having their heads turned by the potential returns on offer.

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Which investment opportunities are you focused on right now?

All: We have a number of sub-￡50m sales in Soho – Soho Square, Wardour Street and Old Compton Street – which is one of the most liquid markets, on account of its wide appeal to tenants and extensive amenities.?This is in addition to a sale on New Bond Street and several potential acquisitions.?

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Which recent investment deal are you most proud of, and why?

SB: We recently sold a beautiful building, the Lush HQ on Beak Street, after a three-year, stop-start marketing campaign. Such a nice building deserved a good sale price and a good home, which we achieved.

GH: I was delighted to recently advise Bywater on the acquisition of 34 Fouberts Place in Soho. It is a prominent corner freehold building, located just off the iconic Carnaby Street.

SH: The nice easy ones where the transaction proceeds according to plan - unfortunately, these are few and far between. So, probably the deals where every spanner is thrown at you but you still get the deal over the line and the client is happy!

What inspired?you to pursue a career in property?

GH: Work experience showed me that the property industry offers a multitude of career paths and opportunities. It is an industry which allows you to apply a work hard/play hard work ethic and is highly rewarding.??

SB: My family had a history in property going back to a family business in Norfolk so I really think it’s in the blood!

SH: It was a stroke of luck. I was persuaded by an old school friend that it was a very sociable, people-orientated industry, which I quickly found out for myself when I joined Clive Lewis & Partners in 1986. No mobile phones or laptops meant plenty of formal (mostly informal!) face-to-face meetings. Good days!

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Who in the commercial property industry inspires you the most?

SB: I have been lucky enough to have worked with some very talented people who led by example and always had time to listen whilst having insatiable appetites for deals - Chris Ireland is my top pick. Close second is Simon Hall - I’ve never known anyone who works so hard, is so dedicated to his clients and makes everyone he speaks to happy. That’s a recipe for a successful career. He’s a one-off.

SH: There have been a few but would have to say Simon Quayle (ex-Shaftesbury PLC ) and John Olney (RX London). Not only exceptional surveyors but true gentleman and, most importantly, they have become great friends.

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How do you get fired up for a day of meetings, inspections and deal negotiations?

GH: I listen to Time feat Jules Buckley - Pete Tong

SH: A strong cup of coffee and bacon butty – this is probably why I am 1.5 stone heavier than when I first started my career!

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What’s your favourite part of the job as an investment agent?

SB: The people make it - if I have a bad day, it’s normally because I haven’t been on the phone or in meetings, seeing people and finding out what’s going on. Communication is the key - I might be old fashioned but seeing people in person always wins.

GH: Reporting… no not really! The people and the opportunity to be creative.

SH: 100% the people and office camaraderie. ?

How do you like to celebrate completion of a big deal?

SB: Hally let’s me leave 5 minutes early

GH: Sushi

SH: Letting Bucks leave 5 minutes early.

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Want to secure the best advice for your property investment or divestment strategy this year? Get in touch with the HG Central London investment team to find out how best to capitalise on the current market.

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