EUROPE - Hermes Real Estate has acquired a £27m (€31.2m) freehold portfolio in central London as part of its drive to sell off trophy assets in favour of those requiring active management.
The real estate subsidiary of the £36.7bn BT Pension Scheme acquired the six-asset, two-cluster London Bridge portfolio from Great Portland Estates (GPE) because it offered "small, medium-term refurbishment opportunities".
Although the seller recognised the value-added potential of the portfolio, GPE said acquisitions it had made over the past 12-18 months offered significantly better refurbishment opportunities.
"The team's focus is better directed toward these larger, more impactful schemes," it said.
In a statement accompanying the results posted today, the GPE confirmed its positive forecast for London's commercial property market, which looks likely to outperform the rest of the UK.
Hermes said: "Within [a] weaker market context, London's economy continues to offer a more compelling economic story than the UK as a whole, in large part due to its status as a global city.
"Indeed, it continues to benefit from its relative safe-haven status following events such as the Arab uprisings earlier this year. Similarly, investor concerns surrounding the euro-zone, London's diversified economy and its deep and highly skilled pool of labour all serve to enhance further its relative attraction."
The company's positive outlook is largely focused on the West End.
For the City and Southwark, where the assets sold this week are located, the company forecast a reduction in the overall level of tenant demand in the short term as a result of uncertainty in financial markets.
However, it pointed out that the City's 7.7% office vacancy rate remains comparatively low.
"This, combined with our expectation that a significant number of proposed developments will be deferred or cancelled - due in part due to the lack of speculative development finance or pre-lets - will provide some support to rents particularly full of quality buildings in central location," it said.