UK Commercial:

West End Investment Watch

West End Investment Watch
West End Investment Watch

14 December 2016, words by David Garland

£1.5bn of Christmas transactions ready to be wrapped up

■ November saw investment volumes of £574m over seven transactions. This brings the annual total to £7bn, down just over 6% on this time last year. We expect to witness a strong end to the year and with circa £1.5bn under offer, indications suggest 2016 annual turnover could reach at least £8.5bn. This would reflect the fourth highest annual turnover on record, down just 2% on last year's total transactions figure (see Graph 1).

 

■ Such buoyant turnover demonstrates an active market and reflects a statement by some of their long lasting confidence in London and in particular the West End.

GRAPH 1

West End Turnover

 
Graph 1

Source: Savills Research

■ Savills advised Ashby Capital on their acquisition of Kaupthing’s 50% stake in 1 & 2 Fitzroy Place for £217.1m. The recently completed freehold mixed-use development comprises 251,214 sq ft of office, retail, healthcare and educational uses, with a further 289 residential units. The majority of income is derived from the offices with 1 Fitzroy Place, being the UK headquarters of cosmetics firm Estée Lauder and 2 Fitzroy Place, multi-let to four tenants.

■ The Cityhold Office Partnership, managed by TH Real Estate has sold the freehold interest in The Peak in Victoria off market for £145m, reflecting a 4.29% net initial yield and a capital value of £1,480 per sq ft. Originally developed in 2009, the 98,000 sq ft building is multi-let to tenants including Bank of Scotland, PetroChina and Guggenheim Capital. The property was acquired by Dubai’s Easa Saleh Al Gurg Group.

■ Brockton Capital has sold 10 Hammersmith Grove for a 16% gross profit just four months after purchasing the building from Aberdeen Asset Management in July. The property has been newly developed and comprises 125,000 sq ft of office and restaurant accommodation with a weighted unexpired term of just under 10 years. The Long Leasehold interest (169 years unexpired) was originally sold in the immediate aftermath of the referendum result for £89m but traded off market in November to Tai United for £103.5m. This reflects a net initial yield of 5.06% and a capital value of £843 per sq ft.

■ Savills advised on 45% of monthly transactions by volume in November and the team are working to exchange on a further six transactions by year end.

■ We have moved in Savills prime yield to 3.25% on the back of recent transactions over the past couple of months. The IPD average equivalent and initial yields currently stand at 4.90% & 3.25% respectively, as outlined in Graph 2, and continue to show softening.

GRAPH 2

Yields

 
Graph 2

Source: Savills Research, IPD, XE

TABLE 1

Key Deals in November 2016

 
Table 1
 
 

Receive the latest research

Key contacts

David Garland

David Garland

Research Analyst
Commercial Research

Savills Margaret Street

+44 (0) 20 7016 3832