The first quarter of 2025 has got off to a stubbornly slow start for UK commercial real estate investment and leasing in many areas, but there have been welcome exceptions and some standout transactions recognised in CoStar's Quarterly Agency Awards.
Lambert Smith Hampton reports total first-quarter transactions at £9.3 billion, a 35% decline from the final quarter of 2024’s two-and-a-half-year high and the lowest quarterly total since the third quarter of 2023. The adviser points out that this was driven by a sharp fall in large-scale transactions, particularly in the living sector, which has propelled investment figures in recent times.
Positives are emerging, nevertheless. Central London office investment lifted 49% from the previous quarter, according to CBRE, to £2.4 billion. There has also been an increase in major investment by global institutions, sovereign wealth funds and private equity, with US private equity group Blackstone for instance investing £1 billion to buy the 50% stake it did not own of The Arch Co. portfolio, as reported, and Norwegian sovereign wealth fund Norges spending close to £1 billion in separate deals buying into Grosvenor and Shaftesbury Capital's London West End estates, as reported.
Take-up and rental growth remain strong performers at the prime end of all commercial real estate markets, too. Knight Frank reports that office take-up across the South East and Greater London markets chalked up the highest first quarter total since 2008, as reported.
In industrial, DTRE reports over 6.3 million square feet of big box take-up across 27 transactions in the first quarter, in line with the post-COVID quarterly average. Investment was disappointing at £1.1 billion in the first quarter, down 43% on the average quarterly deal volume witnessed in 2024. Still, DTRE does not expect President Trump's trade tariffs to materially hold back recovery.
It writes: "The fundamentals of UK logistics real estate are not changed by ‘Trump’s Tariffs'; whilst sentiment could likely be damaged in the very short-term, the cyclical nature of real estate and the increasing likelihood of additional rate cuts by the Bank of England means the UK’s logistics real estate could well be one of the best spots for global capital to put its money to work."
Next quarter's CoStar Agency Awards will hopefully show this beginning to happen across all sectors.
Top Sale
Modon in the mood for London with mega office investment
It was a much better quarter for London office investment, with LSH reporting £1.8 billion of trades, including six deals over £100 million. So it is no surprise that one of these was the top UK sale in CoStar's agency awards.
Middle Eastern investor Modon's acquisition of a 50% stake in 2 Finsbury Avenue for £500 million, which enabled it to join British Land and GIC as a partner at the Broadgate estate scheme, was a landmark transaction on a number of fronts.
Among these, it showed the importance of developing the right building to secure that all-important anchor. US hedge fund Citadel's prelet of a large part of the 750,000-square-foot tower, revealed by CoStar News, was the largest office letting in the capital last year and significantly lowered the project's investment risk.
It was also one of a series of trailblazing transactions in the quarter that underscored a renewed commitment from major global companies to London and UK real estate, as reported here.
Cushman & Wakefield advised Modon Holding. CBRE and Knight Frank advised British Land and GIC.
Top Office Lease
Malaysia's IJM makes big splash with speedy acquisition and lease
Malaysia's IJM secured international law firm Simmons & Simmons in one of London's largest office lettings in recent years at 25 Finsbury Circus, in a transaction first tipped by CoStar News.
The 180,000-square-foot, 20-year letting marked a remarkable few weeks for IJM at an office being rebranded from 1-5 London Wall. It had only bought the building the prior month from TPG Angelo Gordon for £72.5 million. The preleased space will include flexible office layouts, wellness-focused areas and end-of-journey facilities such as bicycle storage, showers, wellness rooms and lockers.
Simmons & Simmons will relocate from Brookfield's Citypoint in 2030. Oxygen has been appointed to deliver the development for IJM. On completion, the Grade II-listed building will comprise 251,068 square feet net internal area, with a projected gross development value of approximately £420 million.
Cushman & Wakefield advised Simmons & Simmons. Knight Frank and CBRE are joint leasing agents at the building.
Top Industrial Lease
No use crying for Boohoo about vacated warehouse after mega lease assignment
Bleckmann's lease of a 403,990-square-foot distribution centre at Daventry in the East Midlands actually added more than 1 million square feet of operational space to its UK portfolio. The building includes a further four levels of mezzanine space totalling 703,225 square feet for the third-party logistics provider, which specialises in supply chain management for fashion and lifestyle brands.
That makes it a clear standout logistics letting in the quarter, but it was noteworthy too in underlining the changing fortunes of online and physical retailers over the past few years. Boohoo, the online fashion retailer that expanded rapidly during the pandemic and retrenched as physical stores opened up to shoppers again, acquired the property in 2021 at the height of lockdown demand for e-commerce. By 2023, it had closed operations at the building.
Bleckmann has taken its lease on assignment from Debenhams, the famous department store group Boohoo bought out of administration without the real estate.
The building is housed at Prologis's RFI DIRFT III development.
Axis Property Consultancy and Dowley Turner Real Estate represent Prologis. JLL represented the tenant.
Top Retail Lease
Freight Island sails into Newcastle
Freight Island, the entertainment and dining group that started life in Manchester, chose Newcastle, and more specifically the city's Eldon Square shopping centre, for its latest 60,000-square-foot venue.
It's another example of how dynamic leisure uses have snapped up spaces vacated by department stores across the UK in recent times. Freight Island took a 15-year lease across the top floor once occupied by Debenhams alongside rooftop space, to create a food, drink, music and immersive entertainment venue.
Debenhams closed its doors at Eldon Square in 2021. The remainder of the space is occupied by fashion retailer Next, which took 60,000 square feet last year.
Metis Real Estate Advisors represented the consortium owner of Eldon Square.