UK’s largest ever single office building deal boosts central London commercial market
The commercial property market in central London is going from strength to strength, despite Brexit, with to total turnover up 24% in July year on year, the latest analysis report shows.
Some £2.352 billion was invested in central London’s commercial property in July alone, taking total turnover for 2017 to the end of July to £11.5 billion, according to the report from international real estate advisor Savills.
Indeed, July was the strongest month recorded since March 2007 for the City, market which saw £2.1 billion traded, boosted by the sale of 20 Fenchurch Street, known as the Walkie Talkie, for £1,282.2 million to Hong Kong based Infinitus Property Group. In London’s West End market, £252 million was transacted.
As of the end of July, Asian investors had accounted for 63% of total City turnover in the year so far, followed by European investors at 17% and UK investors at 11%, the reports shows, while in the West End market Asian investors accounted for approximately 50% of turnover to the end of July, with UK institutions accounting for just 2% of acquisitions by turnover.
The report points out that the sale of the Walkie Talkie, the UK’s largest ever single office building deal, accounted for 61% of City turnover in July, pushing the monthly average lot size up to £190.92 million. The largest deal in the West End during the month was the sale of a 125 leasehold interest in Golden Cross House, 450-460 Strand, to Motcomb for £68.25 million.
‘The first half of 2017 saw central London investment increase 12.3% on the same period last year. While we’re only a month into the second half of the year, the momentum has continued and total 2017 investment volumes may well surpass those of 2016,’ said Stephen Down, head of Savills central London investment team.
‘Although the restrictions announced earlier in August by the Chinese government will reduce real estate investment from mainland Chinese property developers and institutions, investors from Hong Kong, who have been particularly busy in the market in the past year, are likely to continue to be active however we have noticed their buying criteria has become increasingly selective,’ he explained.
‘We expect there to be more stock coming on to the market as we approach the end of the year as existing owners of investments take profits and, provided these sales are priced correctly, we should see continued strong turnover activity of the next three to four months,’ he added.
Savills says its prime City yield is currently 4% and prime West End yield is 3.25%.