Central London commercial property investment reaches £2.9bn in November

By Bridging Loan Directory 2nd December 2014

Central London commercial property transactions reached £2.9bn in November, taking the year-to-date investment volume to £15.4bn, according to DTZ.

‘Under offers’ currently total £3.8bn, and other major properties are at best bids, suggesting 2014 is likely to be one of the most active on record.
The figures, covering all commercial property investment transactions apart from hotels, show an increasing tempo of deals from the £1.2bn in October although the 2014 investment volume is likely to fall short of the record £22.4bn reached in 2013.

The largest lot transacted in November was 30 St Mary Axe, EC3 which was purchased by the Safra family for £725m. In the West End, the Metropolitan Police headquarters at 10 Broadway, SW1 was purchased by Northacre for £350m. There were eight lots transacted last month at £100m or over. In the City three out of four £100m plus transactions were off-market, reflecting a continuing lack of high-value stock on the open market.

DTZ Research shows a record £89bn (USD142bn) of capital currently targeting European commercial real estate, of which a third (£28bn) is targeting the UK. DTZ continues to see strong demand for core assets in the capital from both institutional and private investors. For those seeking prime office assets above £200m, there are relatively few markets in Europe that offer the size and liquidity of central London.

One factor in play is that London still offers good prospects for investors looking for income growth, with various submarkets seeing double-digit rental growth this year. Next year, City rental growth is expected to reach double digits too, thus exceeding growth in the West End during 2015. The last few months have seen record rents achieved in the City of London and King’s Cross. In the West End global oil giant Trafigura is in advanced talks to secure prime space at 30 Berkeley Square at a price rumoured to be close to £150 per sq ft, which would set the record for the highest office rent ever paid in the UK.

Ben Cook, DTZ’s Head of UK Inward Investment, said:

“A record £89bn of capital is currently targeting European commercial real estate, a third of which is targeting the UK. We continue to see strong demand for core assets in the capital from both institutional and private investors. For those seeking prime office assets above £200m, there are relatively few markets in Europe that offer the size and liquidity of central London.”

Sophy Moffat, Central London Research at DTZ, said:

“One factor in play is that London still offers good prospects for investors looking for income growth, with various submarkets seeing double-digit rental growth this year. Next year City rental growth is expected to reach double digits too, thus exceeding growth in the West End during 2015. The last few months have seen record rents achieved in the City of London and King’s Cross. In the West End global oil giant Trafigura is in advanced talks to secure prime space at 30 Berkeley Square at a price rumoured to be close to £150 per sq ft, which would set the record for the highest office rent ever paid in the UK.”