Commercial property investments in London continue to attract buyers and investors with investment volumes recording a six year high of £19.9 billion in 2013.
Commercial property investments in London continue to attract buyers and investors with investment volumes recording a six year high of £19.9 billion in 2013.
Furthermore, the commercial property outlook in London is positive, according to Cushman & Wakefield, the world’s largest privately-owned real estate services firm.
“With a continuing mismatch between high levels of investor demand and inefficient supply, we see no sign of this competitive market abating,” says Mike Tremayne, head of West End investment at Cushman & Wakefield.
The firm reports that investment in the city hit a six year high increasing by 47 percent on 2012 (£13.5 billion), with investment volumes recording a high of £19.9 billion in 2013.
Of note, Central London saw the highest levels of investment since 2007, West End had the highest annual turnover figure, while in the City & Docklands, overseas investors remained the most active accounting for 80 percent of transactions in the fourth quarter, according to Cushman & Wakefield.
According to the report, investments totalled £5.6 billion in the City & Docklands in Q4 2013.
The firm reveals that foreign investors in the City & Docklands remain the most active accounting for 80 percent of market share (£4.5 billion) across 12 transactions.
As an example, the property More London was bought by Kuwaiti overseas sovereign fund St Martins (Kuwait Investment Authority) for £1.7 billion and the acquisition of a 50 percent stake in Broadgate by GIC, Singapore’s sovereign wealth fund, also for £1.7 billion, show strong foreign investor interest in that area.
Cushman & Wakefield reveal that these two transactions are the UK’s largest ever commercial property deals.
The City & Docklands recorded 26 transactions valued at £1.1 billion - 19 percent of Q4 market volume with an average deal size of £42 million.
Total investor volume is hugely reliant on a small number of very large deals such as More London, Broadgate and the St Botolph Building (£464 million) and the top five deals for Q4 2013 account for around 77 percent of total City & Docklands investment, according to the firm.
Of note, Central London saw the highest levels of investment since 2007, West End had the highest annual turnover figure, while in the City & Docklands, overseas investors remained the most active accounting for 80 percent of transactions in the fourth quarter, according to Cushman & Wakefield.
Furthermore, they say turnover for the first quarter of 2014 is likely to be strong in the City & Docklands market with the level of acquisitions currently under offer amounting to approximately another £1.3 billion across approximately 30 transactions.
Bill Tyser, head of City investment at Cushman & Wakefield, says the outlook remains for a healthy but opportunity constrained market going forward.
Tyser points out that while some concerns persist over the possibility that further yield compression is limited in light of possible bond yield increases which might result in yield expansion on the horizon, the market is now entering the era of a return to property fundamentals in light of economic recovery – principally that of property rental growth, with a controlled supply pipeline and increasing occupier sentiment, decision making and demand.
“The outlook for 2014 is positive with continued international capital inflow coupled with a strengthening UK institutional investor demand,” he says.
The West End recorded £2.3 billion of turnover in 39 transactions with an average deal size of £58.3 million, taking the annual figure for West End investment to £8 billion across 187 transactions – the highest annual turnover on record.
Around 75 percent of the volume transaction in 2013 was bought by international investors, up from 52 percent in 2012 – this underlines London’s truly global appeal, according to Cushman & Wakefield.
The firm expects investment turnover in the West End to start strongly in early 2014 with Holborn Links understood to have exchanged at £215 million. - Denise Mhlanga
