Total transactions across the capital for the first quarter were around £2.19 billion compared to £1.63 billion in the first quarter of 2010. However, this represented a decrease of 24% from the previous quarter, as a shortage of stock hampered performance, it points out. This was the first quarter showing a fall, following six consecutive quarters of increasing investment.
Total transactions for 2010 in central London totaled around £9.9 billion, an increase of a third on that for 2009 which stood at £6.6 billion. The amount of investment still falls a long way short, though, of that achieved during the property boom of a few years ago when it was £19.42 billion in 2007, £14.49 billion in 2006 and £15.25 billion in 2005.
From the figures, the City investment market appears to have been extremely active, with a turnover of £1.6 billion and 24 transactions. However, these are heavily skewed by the final exchange and completion of approximately five major 2010 transactions, amounting to in excess of £1 billion, the report points out. These include several acquisitions: the Goldman Sachs building, River Court House, Fleet Street by Joseph Lau for £280 million; Freshfield’s HQ building, 65 Fleet Street by the Malaysian Pension Fund for £148 million and the Rolls Building, Fetter Lane by Legal & General for £300 million.
West End completed transactions totaled approximately £600 million in the first quarter, significantly down on the same period in 2010 when it was £1.06 billion and also on the fourth quarter of last year when it was £1.5 billion.
However, these figures do not take into account the circa £850 million of transactions where contracts have exchanged in the first quarter and are likely to complete in the second quarter. Notable acquisitions include: Belgrave House by Teachers for £108 million, Savoy Court by USS for £45.40 million and 10 Old Bond Street by a private investor for £43.75 million.
Overseas investors continue to lead the market, accounting for over 53% of deals in the City, and over 55% of deals in the West End. Inclusive of exchanged transactions, the West End figure increases to over 65%. In the City, the majority of sales came from UK funds at 51.9%. Domestically, the UK funds and PropCos continue to be active, albeit on a selective basis, and account for approximately 33% of the West End market over the first quarter.
In the City, the market remains polarized between very large investment opportunities of which there are a number, approximately £2 billion worth in four buildings, and much smaller opportunities. The total current availability in the City is around £2.8 billion among 34 opportunities.
In the West End, demand for good quality investments remains strong. The retail sector is in particular demand with overseas buyers generally at the head of the queue, but with some institutional interest for lot sizes under £50 million. Offices are also in demand, especially those with active management opportunities, the report points out.
‘There remains a heavy weighting of international money seeking opportunities in the market and a sweet spot remains for standing investments of between £50 and £150 million,’ said Bill Tyser, head of City investment at Cushman & Wakefield.
‘Whilst the demand for very large investments is less, it is still active and is a reflection of the international view of London as a relatively stable market against the geo-political unrest and natural disasters experienced in recent months. The outlook for quarter two remains strong, albeit for the City the number of acquisition opportunities remains relatively narrow and dominated by large lot sized investments,’ he explained.
Clive Bull, head of central London investment at Cushman & Wakefield said that central London commercial property remains a mature, transparent and liquid market. ‘Demand remains strong from both domestic and overseas investors as London continues to be perceived as a relatively safe haven for investment, especially in recent events around the world. With sterling still weak and an increase in stock likely with banks off-loading assets, we are confident that 2011 will see volumes rise,’ he added.
