Our research specialists, working with our national and regional investment professionals, have released our UK Investment Quarterly report reflecting on Q2 2021. 

The research includes a detailed review of commercial property investment volumes by sector and type of purchaser.

Commercial property investment volumes increased significantly during Q2 2021, with preliminary figures suggesting that £11.5 billion traded during the quarter. This figure is up by 236% on Q2 2020, when the onset of the COVID-19 crisis meant that only £3.4 billion was recorded, and is the highest Q2 total since 2018. This takes volumes for the first half of the year to £20 billion, an 18% rise on H1 2020 and again the highest H1 figure since 2018.

A rebound in office investment is noticeably underway, with significant deals bolstering investment volumes, particularly in London. Activity in the industrial sector shows no signs of slowing and strong demand for assets, most notably distribution warehouses, has frequently seen asking prices exceeded. As a result, investment in the sector may come close to, if not exceed, the highs achieved in 2017 by the end of the year.

The coming months should see a relaxation in quarantine restrictions for overseas buyers, the domestic economy moving close to its pre-recession size, and greater certainty over future office occupier demand following the end of ‘work from home’ advice. We therefore expect a further increase in buyer interest over the coming months which will mean upward pressure on pricing for quality property in key sectors such as offices. 

Distribution warehouses and multi-let industrial estates will remain highly sought after, and we are now seeing double-digit growth in capital values across the market. Demand for assets in the life sciences sector remains insatiable amid very limited buying opportunities, and we continue to see very aggressive bidding on those assets that do come to the market. 

With long term ‘defensive’ income yields hardening, it is likely that some demand will switch to cheaper ‘value add’ and asset management opportunities. Even in the harder hit sectors such as retail and hotel investments, we expect significant buyer interest where apparent discounts are being offered and, albeit further up the risk curve, medium to long term value can be unlocked.

The office sector once again retook its position as the leading investment sector in Q2, with turnover reaching £4.7 billion, a significant rise of 152% on Q1 2021 and 269% on Q2 2020. A total of 13 deals over £100 million were recorded, with the five largest transactions making up half of the total volume. This was led by Brookfield’s £714 million acquisition of the Arlington portfolio – comprising 36 assets located with the Oxford-Cambridge-London Arc – and their purchase of 30 Fenchurch Street, London EC3 for £635 million (4.5% NIY). 

London remained the centre for activity, with seven out of the top 10 deals located in the capital. These include Union Investment’s purchase of BT’s new HQ, One Braham, located in the East City fringe, for circa £500 million (4.1% NIY); Suntec REIT’s £353 million purchase of 3 Minster Court, EC3 (4.5% NIY); Wing Tai Properties purchase of 66-73 Shoe Lane, EC4 for £255 million (4.1% NIY); and the acquisition of Heron Town, EC2 for £195 million by Madison International Realty. Overseas investors accounted for 80% of the investor profile, acquiring nine out of the top ten purchases as evidenced by the deals mentioned above.

The industrial sector has also had a strong quarter as volumes reached £2.9 billion, up by 191% on the same period of 2020, but down on the £3.5 billion recorded during Q1. The sale of the Albion Portfolio was the largest deal of the quarter, acquired by Blackstone for £285.5 million (5.95% NIY), followed by Savills Investment Management’s purchase of an Amazon fulfilment centre in the East Midlands for £161 million. 
Large industrial portfolio deals remain key to transaction volumes, with five acquired for over £100 million – Albion Portfolio (mentioned above); Sierra Portfolio (£127.45 million purchased by ICG); Access Portfolio (£108.4 million acquired by Goldman Sachs); Highgate Portfolio (£106 million purchased by Northwood Investors); and a portfolio of six speculative warehouses in the East Midlands (£100 million acquired by NFU Mutual Insurance).

Investment in the retail, hotel and leisure sectors improved significantly in Q2. Volumes increased by 61% on Q1 to reach just under £2 billion, almost triple that of Q2 2020. Brookfield’s £330 million purchase of a nationwide retail park portfolio was the largest deal of the quarter, followed by MCAP Global Finance’s £180 million acquisition of the national Holiday Inn portfolio. The bounce back may be attributed to higher confidence following the reopening of non-essential retail and leisure in April. The rise in domestic tourism, due to international travel restrictions, has increased the profile of, and interest in the hotel sector, and we expect this to remain active throughout the year. 

Alternative and mixed-use properties saw acquisitions totalling circa £1.9 billion during Q2, unchanged on Q1 and more than four times higher than volumes recorded in Q2 2020. Student accommodation remained highly sought after, as evidenced by the two largest deals – the purchased of two student blocks in Wembley and Whitechapel for £342 million (4% NIY) by GIC Real Estate and Lone Star’s acquisition of the Quintain Portfolio, which comprises four student blocks located across the country, for £315 million. Both deals also represent the continued dominance of overseas capital into the UK, although the proportion of 55% during Q2 is down on the 70% and 63% reached in the previous two quarters.  

Overseas investors accounted for 59% of the total UK investment value in Q2, on par with Q1 and ahead of the 43% proportion reached in Q2 2020. 

US investors remain the largest contributors, acquiring more than £2.1 billion of assets in Q2. Although down on the figures over the last few years, this is positive given that travel restrictions have prevented many buyers from visiting the UK to view assets before agreeing and completing on deals.

Capital from European nations followed and was on par with Q1 (over £1.3 billion), while investors from the Far East invested circa £800 million during Q2, which was almost double that of Q1. Middle Eastern purchasers were also on the shortlist, although their £225 million spend in Q2 was significantly lower than the values reached over the last two quarters. 

On the domestic side, UK property companies led the charge and invested over £1.9 billion, while institutional investors purchased £1.3 billion, a strong rebound on Q1. 

During Q2, £4.4 billion was invested in Greater London’s commercial property market, doubling Q1 volumes and accounting for 38% of all UK transactions – slightly below the quarterly average of 41% recorded between 2016-2020. Strong performance was documented across all sectors except mixed-use properties. Of the £4.4 billion invested across Greater London, two thirds, or £2.9 billion, was transacted across central London. 

While we reported in Q1 that there was an absence of big-ticket office acquisitions, this trend was reversed in Q2. The office sector was close to £3 billion traded, and we have seen a surge in investments being either fully marketed or ‘strategically’ placed with buyers on a more selective basis. In the City, transactions in Q2 included the previously mentioned deals on Fenchurch Street, Braham Street, Minster Court, Shoe Lane and Bishopsgate. Deals in the West End included Deka’s purchase of 8 St James’s Square for £235 million, reflecting a yield of 3.3%, and Rothesay Life’s acquisition of 102 Petty France for circa £600 million. Meanwhile in Midtown, Deka has just completed on the £118 million purchase of Evans Randall’s ‘Bureau’ building.

Industrial investment in Greater London increased by 24%, both over the quarter and on Q2 2020, to total £345 million, while £426 million was traded in the retail, hotel and leisure sectors, a rise of 43% on Q1. Across these sectors, deals of note include Cerberus Capital Management’s purchase of a hotel at 9-13 Aldgate High Street, London EC3 for £115 million; British Land acquiring an industrial property at Heritage House, Enfield for £87.25 million (2.17% NIY); and Romulus Capital purchasing the Centre Court shopping centre in Wimbledon for £72.5 million (5.9% NIY).

London continues to offer attractive yields compared with most major European cities and the increase in volumes demonstrates the return of investor appetite for high quality central London offices.

To find out more about our commercial property experience, please click here.

For further information on the investment market, please contact a member of our team.


1. Data has been sourced from a variety of external platforms, including Property Data, CoStar, Radius as well as in-house databases.
2. Data includes deals in the office, retail, industrial and alternative property sectors and excludes residential schemes and land deals.
3. Data correct as at 2 July 2021.

@ John Knight
John Knight
Head of Investment
020 7016 0730 email me about John
@ Daniel Francis
Daniel Francis
Head of Research
020 7518 3301 email me about Daniel

John was previously a Director of the National Markets Office Investment department at BNP Paribas Real Estate and formally Strutt & Parker. He has over 15 years’ experience in the UK investment market, with a particular focus on business and office parks.

John advised on a range of high profile acquisitions and disposals of investment properties for a variety of key clients, including Arlington/TPG, Railpen, Dimah Capital, Orchard Street Investment Management, Hunter Real Estate Investment Management and Frasers Property. 

At Carter Jonas, John will work with colleagues from across the business’s expanding commercial division - including teams in Bristol, Oxford, Cambridge, Birmingham and Leeds - building on existing experience to spearhead a dedicated and cohesive approach for private and public sector clients targeting commercial properties.

I can provide advice on:
Daniel Francis has been Head of Research at Carter Jonas since 2018. He is responsible for delivering the firm’s programme of market and topic-based research, providing clients with the insight they need. Daniel’s main focus is the commercial market, and he works closely with his rural and residential research colleagues. 

Daniel is a member of the Investment Property Forum and the Society of Property Researchers.
I can provide advice on: