UK Commercial:

West End Investment Watch

West End Investment Watch
West End Investment Watch

22 January 2018, words by Ben Raywood

2017 ends on a high as turnover exceeds £7 billion for the fifth year in a row

Market comment and notable deals

■ December saw turnover of £1.18bn, bringing total annual turnover to £7.03bn over 138 transactions. This has left 2017 turnover 10% lower than 2016, albeit still in excess of the 10-year average by over 8% (see Graph 1). Whilst we recorded a record H1 (average lot size £68m) turnover slowed over H2 where turnover in Q3 reached its lowest level since 2010 (H2 average lot size £38m).

 

GRAPH 1

West End turnover to by quarter

 
Graph 1

Source: Savills Research (accurate to end of December 2017)

■ On behalf of a client of Savills Investment Management, Savills acquired 30 Broadwick Street for £190m, reflecting a 4.00% net initial yield and a capital value of £2,015 per sq ft. The newly developed prime Soho freehold property comprises 17,205 sq ft of retail and restaurant accommodation over lower ground and ground floors and 77,092 of sq ft of Grade A office accommodation arranged over six upper floors. The property is multi-let to four office tenants and four retail tenants providing a WAULT of 11.3 years to expiries and over 10 years to breaks.

■ Spelthorne Council acquired 12 Hammersmith Grove in West London for £170m, reflecting a 5.25% net initial yield and a capital value of £994 per sq ft. Newly developed in 2013 by Aberdeen Asset Management and U&I, the property comprises 170,985 sq ft of office accommodation arranged over ground and ten upper floors and is multi-let to four office tenants including MDSOL Europe, Perform Media Services and WeWork providing a current passing rent of £9,530,864 per annum equating to £56.15 per sq ft overall and a WAULT of approximately 13 years. This represented the largest of only 11 UK institutional purchases of the year and the first we are aware of by the balance sheet of a local authority.

■ NFU Mutual has sold the freehold interest in 24 Old Bond Street and 2-4 Burlington Gardens to Unity (Max Mara Fashion) for £141m, reflecting a 2.46% net initial yield and a capital value of £9,944 per sq ft. The retail and part office accommodation is let to luxury retailer Salvatore Ferragamo at a rent reflecting £1,950 ZA with the remainder of the offices let off rents reflecting approximately £90 per sq ft.

■ UK purchasers remained the largest investor group over 2017, making up almost 33% of total volume. Investment by Asian buyers saw the largest increase in investment by accounting for 28% of turnover compared to 15% in 2016 whilst investment by Middle Eastern buyers saw the largest decrease, dropping by over 12% on 2016 (see Graph 2).

GRAPH 2

West End market share by origin

 
Graph 2

Source: Savills Research (accurate to end of December 2017)

■ The IPD average net initial yield and equivalent yields remain at 3.45% and 4.70%, respectively, their third month at these levels (see Graph 3). Savills prime yield remains at 3.25%.

■ Savills advised on six transactions in December, which equated to 34% of turnover by volume. This rounded off an excellent year for the team posting a record 19% market share.

GRAPH 3

West End yields

 
Graph 3

Source: Savills Research, IPD (accurate to end of December 2017)

TABLE 1

Key deals in December 2017

 
Table 1

Source: Savills Research

 
 

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Ben Raywood

Ben Raywood

Associate
Commercial Research

Savills Margaret Street

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