London commercial property investment reaches highest ever Q1 level

By Bridging Loan Directory -

 

London SkylineThere were GBP4.13bn-worth of Central London commercial property transactions in Q1 2014, the highest level of Central London investment ever recorded in Q1, according to Cushman & Wakefield (C&W).

In the City & Docklands, total investment volume in Q1 2014 reached GBP3.31bn across 32 transactions – this is a record Q1 result.  However, total investor volume is hugely reliant on a small number of very large transactions.

Of this total volume, St Martins – the sovereign wealth fund from Kuwait – completed the acquisition of More London for GBP1.7bn, one of the UK’s largest commercial property transactions ever.

Once again, overseas investors remain the most active and accounted for 77 per cent of investment volume in the City & Docklands.  Even if the More London transaction is removed from statistics, foreign investors were still involved in half of all deals.

This quarter saw the return of UK investors who have been the most active by number of transactions completed. There were 23 UK purchaser transactions during the quarter which equated to a volume of GBP765.5m and represented 23 per cent of market volume.  This also reflects an average transaction size of GBP33.28m.

UK vendors have generally dominated Q1 with the sale of assets which include 1 Poultry by a UK private investor to Perella Weinberg and AXA REIM sale of Sixty London to Hines on behalf of a new German fund.

Turnover for the second quarter of 2014 is likely to be strong with approximately 25 transactions currently either under offer or exchanged, amounting to an additional GBP800m of turnover.

The top five deals for Q1 2014 in the City & Docklands accounted for GBP2.35bn, or 71 per cent of total investment.

Bill Tyser, partner in Cushman & Wakefield’s City investment team, said:

“From a global perspective, City of London prime yield profile remains attractive and there continues to be a considerable weight of money both domestic and international facing the market.  As the second phase rental recovery builds, coupled with positive outlooks on the UK economy and employment growth into London we can expect continuing strong activity and further yield compression as we move through 2014.”

London’s West End saw the highest annual turnover on record in 2013 at GBP8.2bn. Following that, Q1 2014 has got off to a steady start with transaction volumes totalling GBP824m across 32 transactions.  This is a 19.6 per cent decrease compared to Q1 2013 which saw GBP1.026bn in 41 transactions.

While the turnover figure for Q1 is down on last year, this is a consequence of a shortage of stock as opposed to indicating any lack of demand.

Notable transactions this quarter include the purchase of 141-142 New Bond Street, W1 by a UK private from an overseas investor for circa GBP75m; the purchase of Waterstones, Piccadilly, W1 by Meyer Bergman from IVG for GBP67.5m; and the purchase of Jaeger House by Shaftesbury from Derwent London for GBP30.75m, reflecting a NIY of c. 2.53 per cent.