UK Commercial:

City Investment Watch

City Investment Watch
City Investment Watch

13 December 2017, words by Ben Raywood

Record turnover in November means total volume could finish 55% up on 2016

Market comment and notable deals

■ November saw investment volumes of £1,661 million across 14 transactions (resulting in an average lot size of £115.11M), the largest ever turnover in the month of November, highlighting the continued demand for City buildings.

■ Total turnover for the year has now reached £10.15bn across 111 deals (£92.3m avg lot size), which is 51% up on this point last year. The rolling 12-month total turnover is currently £11.48bn, 52% up on the long-term average.



City turnover with forecast

Graph 1

Source: Savills Research – accurate to end of November 2017

■ In the City market, we are currently monitoring an estimated £4.4bn of available opportunities, although this gives the impression of an over supplied market, it is important to note that of the available properties, the 10 largest deals account for 78% of total volume. We are currently monitoring £3.95bn of under offer stock, reflecting an average deal size of £106.71m.

■ It is unlikely that all the properties under-offer transact by the year end. However, we believe circa 65% will exchange or complete resulting in an end of year total turnover figure of approximately £12.5bn, which would be 55% up on 2016's figure of £8.09bn.

■ A notable November deal saw WeWork acquire the Devonshire Square Estate, EC2 for c£580m, and £926/sq ft, taking their total investment into the City market to £670m in 2017. The freehold five-acre estate comprises 628,135 sq ft across 13 buildings. The estate features circa 513,000 sq ft of Grade A office accommodation, an exclusive private members club and a variety of shops and restaurants. It is understood WeWork will occupy the vacant space.

■ November also saw the sale of C-Space, 37-45 City Road, EC1 to Meadow Partners for £74.0m, reflecting 4.6% NIY and £1,165/sq ft. Savills advised the vendor, Helical plc, who redeveloped the building in 2015. The freehold asset provides 63,536 sq ft of office and ancillary accommodation which has been let to two tenants with a WAULT in excess of 12 years. The current passing overall rent is £57.42/sq ft.

■ For the year to date, Asian investors have continued to be the most active accounting for 53% of City turnover. UK investors have accounted for 13%, while European investors are next with 12%. Activity from the US increased significantly following the recent WeWork deal and accounts for 12% of turnover. Middle Eastern investors are next with a 7% share of turnover while investors from other regions account for the remaining 3% of turnover.


City turnover by purchaser profile

Graph 2

Source: Savills Research – accurate to end of November 2017

■ There has been a notable shift in the buyer profile in the City this year with private investors accounting for the majority of turnover at 32%, compared with an average of 9% over the last three years. Property companies have accounted for 30% of total turnover this year compared with a three year average of 16%. While Institutions have only accounted for 28% of turnover compared with the three year average of 71%.

■ Savills prime City yield remains at 4.00% for the tenth consecutive month, this compares with the West End prime yield of 3.25% (a spread of 75bps).


City & West End average prime yield

Graph 3

Source: Savills Research – accurate to end of November 2017


Key deals in November 2017

Table 1

Source: Savills Research


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Key contacts

Ben Raywood

Ben Raywood

Commercial Research

Savills Margaret Street

+44 (0) 20 7409 8791