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.