NEWS ANALYSIS: London’s new bubble

Pity Blackstone can’t already flip its newly-made investment in London’s Broadgate office complex.

The firm has a three-year lock-in period with the other 50 percent joint venture owner, British Land, according to sources.

The notion of selling the stake acquired for £77 million (€85 million; $128 million) of equity last month might be impossible, but the point being made by real estate investors in London is that valuations for prime office buildings in central London appear to be rising. Indeed, there is even talk of a “bubble” re-emerging.  

Being that these are deflationary and debt-constrained days, use of the word “bubble” is noteworthy. 

Alex Jeffrey, chief executive of MGPA’s European business, said that on the one hand economic conditions have stabilised, but on the other hand the weight of capital – some of it from Asia – has “priced up assets”.

“In most cases, it is very difficult to see value in the UK,” said Jeffrey. “There is almost a bubble re-emerging especially in prime central London offices which seem disconnected from the underlying fundamentals.”

Christian Delaire, chief executive of AEW Europe, added: “In the UK we have been very active over the last 12 months. We are still actively seeking select opportunities but the window may close soon because of the huge amounts recently raised to target this market.”