UK Commercial:

West End Investment Watch

West End Investment Watch
West End Investment Watch

12 April 2018, words by Savills Research

Strong investor demand frustrated by absence of marketed stock

Market comment and notable deals

■ March saw volumes of £354m over 12 transactions, bringing Q1 2018 turnover to £1.07bn over a total of 24 transactions. Transactional volumes have been muted over the first three months of the year leading to the lowest quarterly turnover since Q1 2015, signifying a 17% decrease on the Q1 average of the last 10 years (see Graph 1).

 

GRAPH 1

Quarterly transaction figures

 
Graph 1

Source: Savills Research (accurate to end of March 2018)

■ In the largest deal of the month, Capco has sold The Empress State Building in Earls Court to its tenant, The Mayor’s Office for Policing and Crime, which has an existing lease expiring in June 2019. The building totals circa 451,000 sq ft arranged over 31 storeys, with final pricing of £250m equating to a capital value of £554 per sq ft.

■ Lasalle Investment Management has sold 49 Albemarle Street for £20.75m, reflecting a 3.06% net initial yield and a capital value of £2,552 per sq ft. The freehold Grade II listed office and retail property totals 8,130 sq ft. The retail unit is let to Self-Portrait until May 2027 at a passing rent reflecting £357 ZA, whilst the offices are multi-let to three tenants at a passing rent equating to £75 per sq ft overall. The purchaser, a private European Investor, is widely perceived to be a special purchaser due to their considerable existing ownership on Albemarle Street.

■ The private European buyer of 49 Albemarle Street has sold 25 Dover Street for £13.4m reflecting a 2.88% net initial yield and a capital value of £2,270 per sq ft. The property totals 5,904 sq ft and is multi-let to eight tenants at a rent reflecting £69.79 per sq ft overall.

■ A private UK investor has acquired 42-46 Riding House Street & 15-16 Nassau Street for £9.4m, reflecting a 2.63% net initial yield and a capital value of £1,126 per sq ft. The building comprises 8,351 sq ft of gallery, retail, office and residential accommodation. Multi-let to 15 tenants, the property produces a total rental income which reflects just £30.96 per sq ft on the commercial and £37.35 per sq ft on the residential accommodation.

■ Little openly marketed product, combined with a continuing appetite for central London property, has led to the continuation of strong prices being achieved for all commercial asset classes within the West End, with the current supply demand imbalance showing no sign of abating. Investors looking to capitalise on these prices continue to be UK based, overwhelmingly the largest vendor nationality of stock sold in Q1 (see Graph 2).

GRAPH 2

Vendor nationality profile Q1 2018

 
Graph 2

Source: Savills Research (accurate to end of March 2018)

■ There was evidence of smaller mixed-use transactions trading strongly this month, with a Private European Investor purchasing 128 Kings Road for £7.31m, reflecting a 2.90% net initial yield and Savills advising on the sale of 10 Shepherd Market for £4.5m, reflecting a 2.42% net initial yield.

■ Both the IPD average net initial and equivalent yields moved in over the month to 3.37% and 4.66% respectively. Savills prime yield remains at 3.25% (see Graph 3).

GRAPH 3

West End yields

 
Graph 3

Source: Savills Research, MSCI

TABLE 1

Key deals in March 2018

 
Table 1

Source: Savills Research

 
 

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