There has been consensus that UK commercial real estate is overdue a strong recovery, but the transaction figures for the first quarter have remained stubbornly muted. Plenty of deals completed to be recognised in the latest quarterly CoStar Awards, but the market is keen to see many more.

Figures from the real estate agency and consultancy Lambert Smith Hampton show investment slipped back below the £10 billion mark to £9.9 billion, down 9% on the final quarter of last year. That volume was 17% below the five-year quarterly average, although a modest 5% up on the same quarter of last year.

There were bright spots, with the living sectors taking up £4.6 billion of the assets changing hands, and the hotel and leisure sector standing out, lifting to a five-year high of £1.7 billion. Little surprise than that the quarter's two largest deals were hotel transactions, Starwood Capital buying a 10-hotel portfolio from Edwardian Group, and MCR Hotels buying the BT Tower in London for conversion to a hotel for £275 million.

Industrial is beginning to pick up after a quiet end to 2023 but figures for the sector, as well as offices and retail, remain low. The real estate agency DTRE reports industrial investment was down 21% on the 10-year pre-COVID average, with £1.1 billion traded over the first quarter. But it says by the end of the year there will likely be more activity, with capital sitting on the sidelines "awaiting a definitive signal from the world’s central bankers".

There are reasons for continued stickiness, both investment and occupier wise. While analysts expect interest rates to fall, it is yet to happen, and at the same time swap rates, one of the main tools for lenders pricing fixed-rate term, have been rising. It is a perfect recipe for buyers and vendors to press pause.

The good news is March was by far the strongest month of the three and that is continuing into the second quarter.

Figures from the brokerage Knight Frank for instance find £1.3 billion of London offices traded, down on the £3 billion-plus typically seen over a quarter, while just £300 million of that was in the City. Those figures represent the lowest quarter for the City since 2002. On the plus side over £1 billion of the sales took place in March.

And for those with new, modern industrial, office or retail space, the occupier story remains solid. As an example, the Manchester Office Agency Forum finds that the city's office market remains robust, with 50 deals completed in the first quarter, or a total of 172,782 square feet, down slightly on the 205,397 square feet completed in the first quarter of 2023.

But the focus is mainly on sustainable, new buildings, and it is here that the winners of CoStar's Agency awards will most likely continue to be found.

Starwood Books Blockbuster Deal as Hotel Sector Has Lift-Off

American private-equity firm Starwood Capital's acquisition of 10 London hotels from Edwardian Hotels for £800 million was by a long chalk the biggest direct real estate acquisition of the quarter, and underscored the heightened popularity of hotel investments as the leisure sector has bounced back from COVID-19 lockdowns.

According to Cushman & Wakefield UK hotel investment volumes increased 138% year-on-year in the first quarter, with a collective 7,600 rooms trading to the tune of £1.7 billion.

The standout deal saw Starwood buy 10 Radisson Blu hotels and 2,033 rooms in the capital and it has said it is planning a major investment in improving the portfolio.

The sale excluded three UK hotels that Edwardian believes are the jewels in its portfolio, one of which, the Edwardian Manchester, used to be The Free Trade Hall, made famous for the May 1966 Bob Dylan concert in which he was heckled by a member of the audience for switching halfway through his performance to an electric guitar.

JLL advised the seller.

Morgan Stanley Commitment Provides Shot in the Arm for Canary Wharf

Morgan Stanley's commitment to keeping its London head office at Canary Wharf was a major boost for the Docklands district, with its developer saying reports of an occupier exodus are missing a broader story of rejuvenation and expansion.

The investment bank's decision was also a standout letting for the wider London market. It began looking for a new 600,000-square-foot London headquarters in 2020 ahead of an upcoming break clause, sparking much speculation it would join the likes of HSBC and Clifford Chance in relocating to elsewhere in the capital.

Instead the group has extended its lease with Canary Wharf Group on its 547,000-square-foot EMEA headquarters at 20 Bank Street. The lease will run until 2038 and includes an investment to improve the property’s sustainability performance from Canary Wharf.

For an interview with Brookfield and Qatar Investment Authority-owned Canary Wharf's Jon Mulqueen about the importance of the transaction and other recent initiatives at the estate click here.

Cushman & Wakefield represented Morgan Stanley, while CBRE and JLL are leasing agents for Canary Wharf Group.

Segro on a roll with Japan's Yusen in Northampton

Japan's Yusen Logistics UK's deal with the UK's largest real estate investment trust Segro to take an 1.2 million-square-foot hub in Northampton cemented a burgeoning relationship between tenant and landlord.

The building will be Yusen's largest facility globally and one of the biggest warehouses in the UK's Midlands industrial hotspot.

The lease will see the company anchor the 600-acre Segro Logistics Park Northampton, enabling the company to "provide its customers with rail freight distribution solutions and support them in reducing their carbon emissions" it has said. It is the first tenant at the park.

Segro subsequently sold the nearby Northampton IV, a 210,303-square-foot distribution hub also leased to Yusen Logistics, for £25.6 million or a 4.8% yield to EQT Exeter.

CBRE, Colliers and Cushman & Wakefield represented Segro.

Familiar name signs quarter's biggest retail lease again

Frasers Group, the highly acquisitive retailer set up by Sports Direct tycoon Mike Ashley, is no stranger to being the name attached to the biggest retail deals in CoStar's Agency Awards.

In recent times it has been on a major drive snaffling former department store spaces. This quarter's largest transaction will see it open several stores in Queensgate, Invesco’s 835,000-square-foot shopping centre in Peterborough.

The group will open a Frasers department store and Sports Direct in the former John Lewis department store unit, spread across 92,500 square feet.

The Frasers store will house different brands across men’s, women’s and kidswear, as well as a homeware and beauty offering, while there will be a 30,000-square-foot Sports Direct.

Invesco was advised by Time Retail Partners.