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Some commercial property markets in London have slow start to 2018

Commercial property investment volumes in the West End and City of London markets slowed in the first quarter of 2018 as the number of available opportunities failed to keep pace with strong investor demand, new research shows.

It was a muted start to the year in the City, with first quarter turnover reaching £1.37 billion across 20 transactions, 11% down on the 10 year average of £1.54 billion, according to the report from real estate firm Savills.

It says that while investor sentiment remains strong, highlighted by the fact that there is currently £3 billion of assets under offer in the market, 20% of which has already unconditionally exchanged, a lack of available stock is compressing volumes.

The report explains that this is particularly acute in the sub £50 million segment of the market, with only 16 properties currently available within this price range, compared with 25 in 2017 and 33 in 2016.

In the West End volumes were also subdued with turnover for the first three months of the year totalling £1.07 billion over a total of 24 transactions, some 17% below the 10 year average for the first quarter.

Savills says that little openly marketed product, combined with continued appetite for Central London property, has led to strong prices being maintained for all commercial asset classes within the West End, with the current supply demand imbalance showing no sign of abating.

‘With investor interest remaining high the lack of available stock is likely to continue to frustrate both Central London markets. The supply/demand imbalance is particularly evident at the lower price points, where there is a wide pool of investors, both foreign and domestic, hunting for stock,’ said Stephen Down, executive director at Savills and head of the central London investment team.

The research also shows that in the City, Asian investors continue to be the main players, accounting for 57% of total first quarter investment volumes, but UK investors were responsible for 23% and were ahead in terms of number of deals, with 12 acquisitions, some 60% of all City deals.

Savills prime City yield remains at 4% for the fourteenth consecutive month, this compares with the West End prime yield of 3.25%.