DWS Scraps City of London Office Sale as Lockdown Saps Demand
(Bloomberg) -- DWS Group has abandoned plans to sell a City of London office building after bids fell short of its 145 million-pound ($200 million) asking price, the latest evidence of the pandemic eroding demand for all but the best new properties.
The German asset manager majority-owned by Deutsche Bank AG has taken 85 King William Street off the market, and will now carry out a partial renovation, according to a DWS spokesman. The recent departure of some tenants from the building known as Capital House contributed to the low bids, according to people familiar with the matter, who asked not to be identified because the process is private.
Capital House is “one of many strong core London office assets that DWS will continue to add value to through our active management strategies,” the DWS spokesman said, without commenting on the vacancies.
An easing of coronavirus restrictions helped boost activity in London’s office market late last year, with deal volumes in line with the long-term average. But the latest lockdown, which has further delayed the return of workers to offices, has once again put a damper on sales, especially for properties that need modernizing.
The divergence in London’s commercial property market has accelerated during the pandemic. Investors hungry for income in the face of anemic bond yields continue to pay high prices for buildings with long leases to solid companies. But properties with vacancies or delinquent tenants are struggling amid doubts about when demand for office space will return.
Where buildings with shorter leases are selling, they’re trading at a discount. M&G Plc has agreed on terms to buy Saffron House in London’s Farringdon district for about 70 million pounds, two people with knowledge of that transaction said. The property was originally put on the market in October for 87.5 million pounds, Estates Gazette reported.
A spokeswoman for M&G declined to comment.
In another sign that companies are shrinking the amount of space they lease in anticipation of a long-term shift toward more home working, law firm Baker McKenzie will take about 15% less space than it originally agreed to rent last year.
“We have taken a small reduction in our overall floor space per the terms of our lease, which will enable us to use our future office space smartly and more efficiently,” a Baker McKenzie spokesperson said. “We have worked remotely successfully over the past year, and facilitating and supporting flexible working will be central to our future way of working.”
The firm’s decision was first reported by The Lawyer magazine.
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