Golden Opportunities in London

As London gracefully transitions into a buyer’s market for residential and commercial property, a golden opportunity awaits discerning investors with substantial liquidity.

Recent research by BNP Paribas unveils a significant repricing, with a commercial market dip of just over 17% since the summer of 2022. Interestingly, these prices, particularly for assets in high demand, appear to have bottomed out ahead of nearly every European capital, signalling a promising horizon for the London market, with lucrative future rises on the cards. The message? Buy now to benefit later.

The European Central Bank’s more measured approach to interest rate adjustments, compared to the UK, positions London at a pivotal juncture. With indications that UK rates may have peaked, investors looking to expand their portfolios stand at a crucial crossroads, seizing the rare moment after a decade dominated by sellers. The upcoming year promises a unique opportunity for all-equity buyers to secure prime property investments at a significantly reduced value, provided they act swiftly before potential rate adjustments.

*Byron Baciocchi, Founder & CEO of Unica Capital*

So who is interested? Away from larger institutional capital, it is networks of international ultra-high-net-worth individuals and family offices - including those from Switzerland, my homeland - who are poised to strike, owing to quick decision making abilities and liquidity. Indeed our own business is on an active acquisition trail as we seek to build our portfolio and generate stable returns, looking for both turnkey opportunities but also those where refurbishment and repositioning work can help to unlock value.

Interestingly, leading capital markets company Ocorian’s research reveals that a staggering 72% of family offices are eyeing an increase in property holdings, with 30% planning to do so dramatically.

Underpinning this, private investors with liquidity have been the driving force behind 44% of central London commercial investments in the past year, surpassing the historic average of 36%. This surge, totalling £1.3 billion in transactions funded by family offices and UHNWIs, underscores growing confidence in London’s commercial property sector outpacing other European capitals in turning the pricing corner.

For savvy investors, swift and decisive action not only secures deals on discounted properties with strong tenant demand but also positions them for substantial capital appreciation in the next market cycle. All-equity acquisitions, particularly those with high sustainability ratings, come with the added benefit of a “green premium.”

Where is the money looking? International capital and family offices maintain their focus on prime, well-established neighbourhoods like Kensington, Mayfair, Belgravia and Soho. While the allure of seemingly ‘exciting’ or ‘up-and-coming’ areas exists, the prevailing sentiment indicates that prestige, security, and stability continue to be the driving forces behind investment decisions.

Shifting gears to the residential landscape, the dip in sales prices translates into a substantial opportunity for ultra-high-net-worth individuals and family offices. They can acquire properties at a significant discount, holding them to generate stable long-term income. London’s prime property market has witnessed a 2.7% annual rental increase, underscoring the potential for steady income and growth. The city’s status as a global business and cultural hub attracts a diverse range of professionals and mobile high-net-worth individuals, making renting a preferred choice. This steady flow of rental income enhances portfolio diversification and risk mitigation strategies for family offices and investors.

In conclusion, despite broader economic challenges, the confluence of stagnant or falling prices, stability, prestige, and long-term income generation positions prime London property as an enticing prospect for family offices and investors seeking wealth preservation and growth. I firmly believe that the current short-term dips present an enormous opportunity to strategically build a long-term play for the future.

Indeed, our own business is closing in on a significant central London building acquisition which is likely to complete soon and next year we plan to invest circa £190m. After ten years of seller’s holding the cards, London is now a buyer’s market and we certainly intend to make the most of this.

Written by our guest writer, Byron Baciocchi, Founder & CEO of Unica Capital