UK Commercial:

City Investment Watch

City Investment Watch
City Investment Watch

14 March 2017, words by Ben Raywood

Against a background of investor demand outstripping current supply, Savills prime City yield is now 4%

Market comment and notable deals

■ February turnover was £454m across nine deals, equating to an average lot size of £50.44m. This brings total turnover for the year so far to £723.2m across 16 deals.

■ In the City market, we are currently monitoring 65 investment opportunities totalling circa £4.3bn. Of this, 27 are currently under-offer totalling circa £2.7bn, leaving an estimated £1.6bn worth of available opportunities.

 

GRAPH 1

City 12-month rolling total turnover

 
Graph 1

Source: Savills Research – accurate to end of Feb 17

■ A notable deal from February saw JMI Properties acquire Whitefriars, 65 Fleet Street, EC4 for £160m, 5.56% NIY and £697/sq ft. The building is fully let to Freshfields Bruckhaus Deringer LLP until August 2021, at which point they will then move into 100 Bishopsgate, EC2.

■ Also in February, a private Hong Kong investor acquired the two adjoining buildings 110 Cannon Street, EC4 & 5 Martin Lane, EC4 for £93m, 4.7% NIY and £890/sq ft. The buildings are multi-let to tenants including Operis Group Plc, Fixi Plc and MGM Advantage with a WAULT of 4.39 years.

GRAPH 2

Turnover by WAULT

 
Graph 2

Source: Savills Research – accurate to end of Feb 17

■ As of the end of February, UK purchasers have been the most active accounting for 41% of turnover by volume across nine deals. They are closely followed by Asian purchasers (40% across four deals), US purchasers (17% across two deals) and Middle East purchasers (14% across one deal).

GRAPH 3

City & West End prime yield

 
Graph 3

Source: Savills Research – accurate to end of Feb 17

■ Savills prime City yield has been reduced to 4.00% against a background of investor demand outstripping current supply. The spread between the City and the West End is now just 75bps with the West End prime yield currently at 3.25%.

■ GBP short-term market interest rates remained relatively static: three montth closed at 0.36% (0bp) and six month closed at 0.51% (-2bp). Fixed term rates (longer than one year) ended lower than last month, five years closed at 0.79% (-25bp) while 10 years closed at 1.18% (-28bp). 10-year UK Gilt benchmark closed at a yield of 1.15% (source: Pegasus Capital).

TABLE 1

Key deals in February 2017

 
Table 1

Source: Savills Research

 
 

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Key contacts

Ben Raywood

Ben Raywood

Associate
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8791