After more than a year, prices have finally levelled out in prime central London, while outer London saw a small uptick in high-end prices from the previous quarter
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The first quarter of the year brought some long-awaited signs of recovery in London’s luxury housing market, offering the first positive quarterly price growth since September 2022, according to a report from Savills on Wednesday.
After six consecutive quarterly price falls, luxury home prices in central London leveled out in the first three months of the year, with a 0.1% quarterly uptick in prices. The £3 million to £5 million (US$3.79 million to US$6.32 million) market saw a slightly larger increase of 0.3%.
Outer London’s luxury market saw greater quarterly price growth, with home prices up 0.8%, as some stability returned to mortgage costs and lured more buyers back to the market, according to the report.
All of this is evidence that the market is “in early stages of recovery,” according to Lucian Cook, head of residential research at Savills.
“The outlook for the housing market has certainly improved, partly because the mortgage market has recovered more quickly than expected,” Cook said in the report. “With the first rate cut rapidly coming into view and recessionary risks easing, greater stability has returned to the cost of mortgage debt, which has positively impacted domestic prime markets, where many buyers rely on borrowing, most notably in leafy outer prime South and West London, as well as the commuter belt.”
Outside of London, prices across the U.K. saw no quarterly growth heading into the beginning of the spring market, which is expected to bring higher levels of buyer activity in many regions.
Suburban regions saw prices dip just 0.1%, while urban areas—like Edinburgh and Glasgow in Scotland, and Bath and Oxford in England—saw prices increase by 0.6%.
Cook said regional buyers are more likely to be concerned about market uncertainty than London buyers in the leadup to the general election.
“As a result, buyers are still expected to be less committed until the dust has settled,” he said.
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New amenities, from a gym to a movie theatre, and a good commuter location filled this suburban office tower
3 min
Manhattan’s office-vacancy rate climbed to more than 15% this year, a record high. About 80 miles away in Philadelphia, occupancy also is at historically low levels. But a 24-storey office tower located between the two cities has more than doubled its occupancy over the past five years.
Developer American Equity Partners bought the New Jersey office tower, known as 1 Tower Center, for $38 million in 2019. At the time, the 40-year-old building felt dated. It had no gym, tenant lounge or car-charging stations. The low price enabled the firm to spend more than $20 million overhauling and luring tenants to the 435,000-square-foot property.
Now, the suburban building is nearly fully leased at competitive rents, mopping up tenants from other buildings after the owner added a new lobby, movie theatre, golf simulator, fitness centre and a tenant lounge featuring arcade games and ping-pong tables.
“Our tenants told us what they needed in order to fill up their offices,” said David Elkouby , a co-founder of American Equity, which owns about 4 million square feet of New Jersey office space.
The new owner also liked the location at the 14-acre hotel and conference-centre complex, off the New Jersey Turnpike’s Exit 9 in East Brunswick. The site is a relatively short commute for millions of workers in central New Jersey and is passed by 160,000 vehicles daily.
The property’s turnaround shows how office buildings can thrive even during dismal times for most of the U.S. office market, where vacancies remain much higher than pre pandemic.
Success often requires an ideal location—one that shortens the commute time of employees used to working at home—and the sort of upgrades and amenities companies say are necessary to lure employees back to the workspace.
One Vanderbilt, a deluxe office tower with a Michelin-star chef’s restaurant and plenty of outdoor space in Midtown Manhattan, is fully leased while charging some of the highest rents in the country.
The 11-story Entrada office building, in Culver City, Calif., is making the same formula work on the other coast. It opened two years ago with a sky deck, concierge services and recessed balconies. A restaurant is in the works. The owner said this month that it has signed three of the largest leases in the Los Angeles area this year.
1 Tower Center shows how the strategy can be effective even in less glamorous suburban locations. The tower is prospering while neighbouring buildings that are harder to reach with outdated facilities and poor food options struggle to fill desks even at reduced rents.
The recent interest-rate cut and reports that some big companies such as Amazon .com are re-instituting a five-day office workweek have raised hopes that the office market might be getting closer to turning.
But with more than 900 million square feet of vacant space nationwide and remote work still weighing on office demand, more creditors are seizing properties that are in default on debt payments.
Rates are still much higher than they were when tens of billions of dollars of office loans were made, and much of that debt is now maturing. The recent interest-rate cut doesn’t mean “office-sector woes are now over,” said Ermengarde Jabir, director of economic research for Moody’s commercial real-estate division.
Lenders are dumping distressed properties at steep discounts to what the buildings were worth before the pandemic. Some buyers are trying to compete simply by cutting their rents.
“Most owners don’t have the wherewithal to do what is required,” said Jamie Drummond, the Newmark senior managing director who is 1 Tower Center’s leasing agent. “Owners positioned to highly amenitise their buildings are the ones who are successful.”
HCLTech, a global technology company, illustrates the appeal. It greatly expanded its presence in New Jersey by moving this year to a 40,000-square-foot space designed for its East Coast headquarters at 1 Tower Center.
The India-based company said it was drawn to the building’s amenities and design. That made possible a variety of workspaces for employees, from quiet nooks to an artificial-intelligence lab. “You can’t just open an office and expect [employees] to be there,” said Meenakshi Benjwal , HCLTech’s head of Americas marketing.
HCLTech also liked the location near the homes of its employees and clients in the pharmaceutical, financial-services and other businesses.
Finally, it didn’t hurt that the building is a short drive from nearby MetLife Stadium. The company has a 75-person suite on the 50 yard line where it entertains clients at concerts and National Football League games.
“All of our clients love to fly from distant locations to experience the suite and stadium,” Benjwal said.
