London office deals hit 20-year low after Truss budget turmoil

ALMOST nobody bought offices in London in the final quarter of 2022, as the market turmoil from now-abandoned government spending plans sent borrowing costs soaring.

Less than £400 million (S$646 million) of offices in the UK capital were bought and sold in the final three months of the year, according to CoStar Group. This was an 88 per cent drop from the quarter before, and significantly lower than the 20-year average of £3.5 billion per quarter, data showed.

The dealmaking freeze, which was worse than the declines during the global financial crisis and Covid-19 lockdowns, came after former Prime Minister Liz Truss’ proposals for unfunded tax cuts spooked markets.

About £6.4 billion worth of deals were recorded in the first quarter of 2022, when investors were pricing in a gentle increase in rates. This outlook drastically changed over the year, as central bankers tried to get a grip of inflation, and markets struggled to digest Truss’ plans.

Buyers are waiting for rates to feed through to valuations. Would-be sellers have yet to mark down their holdings, or breach their loan terms, which could pressure them to sell. BLOOMBERG