UK Commercial:

City Investment Watch

City Investment Watch
City Investment Watch

15 June 2017, words by Ben Raywood

2017 average lot size of £77.4m up 48% on 2016 figure

Market comment and notable deals

■ May turnover was £655m across six deals, equating to an average lot size of £109.2m. This brings total turnover for the year so far to £4.1bn across 53 deals (£77.4m avg lot size), which is 7% up on this point last year. The rolling 12-month total turnover is currently £8.3bn, 11% up on the long-term average.

■ In the City market, we are currently monitoring 69 investment opportunities totalling circa £5.6bn. Of which, 24 are currently under-offer totalling circa £1.4bn, leaving an estimated £4.1bn worth of available opportunities. The 10 largest available assets account for 80% of total availability.

 

GRAPH 1

Average capital value for £100m+ transactions

 
Graph 1

Source: Savills Research – accurate to end of May 17

■ A notable May deal saw CR Land/ Colony North Star acquire 20 Gresham Street, EC2 for circa £310m, at 4.05% and £1,277/sq ft, the third largest City transaction of 2017. The building is multi-let to five tenants, including Standard Bank, TSB Banking Group and Sacker & Partners. The 242,807 sq ft freehold building currently has a WAULT of 7 years.

■ May also saw the sale of 33 Old Broad Street, EC2 for £260m, 3.9% and £1,360/sq ft, from Evans Randall to the Hong Kong listed investor SEA Holdings. The property is let entirely to Bank of Scotland, guaranteed by HBOS, and has a WAULT of 24.5 years. The vendor topped up the rental income to the minimum fixed uplift at the 2019 rent review. SEA Holdings have traditionally invested within their domestic market, however this is the group's second London acquisition after a subsidiary, Asian Growth Properties, bought 20 Moorgate, EC2 last year for £155m.

GRAPH 2

City average lot size

 
Graph 2

Source: Savills Research – accurate to end of May 17

■ The average capital value for transactions over £100m so far this year has been £1,135/sq ft, 19% up on the 2016 figure of £952/sq ft. n Similarly, the average yield for transactions over £100m has hardened from 4.97% last year to 4.52% this year.

■ Savills prime City yield remains at 4.00%. The spread between the City and the West End is still just 75bps with the West End prime yield currently at 3.25%.

GRAPH 3

City & West End prime yield

 
Graph 3

Source: Savills Research – accurate to end of May 17

TABLE 1

Key deals in May 2017

 
Table 1

Source: Savills Research

 
 

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Ben Raywood

Ben Raywood

Associate
Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8791