Investment transaction turnover for the Central London market in 2013 was the highest level ever achieved, according to property advisers Savills and CBRE.
Investment transaction turnover for the Central London market in 2013 was the highest level ever achieved, according to property advisers Savills and CBRE.
The total investment volume reached in excess of £20.6 bn (€25 bn), a 39% increase on the 2012 figure of just under £15 bn, Savills said. The 2013 figure was predominantly driven by Asian investors who accounted for £5.8 bn, an increase of 99% on 2012, and UK investors who accounted for £5.6 bn of total transactions.
Savills confirmed that the total transaction volume for the City of London was £12.2 bn, while the West End saw levels reach £8.4 bn. In terms of the overall number of deals conducted, the firm noted that UK investors dominated in both the City and West End markets with British Land, M&G, Legal & General and Canary Wharf Group making notable purchases.
Separately, CBRE said that Central London witnessed its highest transaction volumes in 2013 since 2007. The capital attracted £16 bn worth of investment as London‘s popularity amongst domestic and overseas investors accelerated.
Transaction levels were boosted by a number of significant deals over £100 mln, notably the sale for £476 mln of the Paddington Central Estate, W2, to British Land; the purchase of 30 Gresham Street, EC2V, for £310 mln by Samsung SRA Asset Management; and the sale of The Lloyd’s Building, EC3M, for £260 mln to China’s second-largest life assurer, Ping An Insurance.
Adam Hetherington, managing director for Central London at CBRE, commented: 'It is hard to believe that 2013 began with concerns of a triple-dip recession; instead the rate of recovery reported in July exceeded expectations and UK services increased at their fastest rate since 1997, reinforced by growth in the financial and business sectors.
'Transaction levels have been supported by increased activity both from domestic investors and the continued weight of overseas money coming into London as it remains the world’s premiere investment destination. The UK’s political stability, tax and legal environment remain attractive to overseas investors, whilst increased activity from domestic investors has been driven in part due to the increase in capital flows and a desire to take advantage of the recovery in the leasing market.
'We have seen new capital and investors arrive from Malaysia, China and South Korea, to name but a few, and we expect this trend to continue and even increase in 2014, which suggests that yields will remain under downward pressure.'
Savills said that Asian investors took the lead in the City, accounting for £4.02 bn, which includes the 50% acquisition of the Broadgate Estate by GIC for around £1.7 bn, the purchase of 30 Gresham Street by Samsung for £335 mln and the acquisition of the Lloyd’s Building by a Chinese insurer for £260 mln. Middle Eastern investors were also prominent in the City, conducting deals equating to £2.6 bn.
In the West End UK buyers continued to lead transaction volumes for investment with deals including British Land’s purchase of Paddington Central for £470 mln and Great Portland Estates’ purchase of Oxford House for £91.5 mln. Savills also highlights that European and Asian investors were not far behind, accounting for £2.5 bn and £1.bn respectively.
Stephen Down, head of Central London investment at Savills, commented: '2013 was a record year for the Central London investment market, which was boosted by a number of very substantial transactions. UK institutions and property companies were particularly prominent, although when looking at purchases over £100 mln, we also note that significant capital flowed into London from Kuwait, Singapore, China and Germany, demonstrating the city’s continued appeal on a global platform.'
Savills was involved in 34% of Central London transactions by volume in 2013 and expects to see overseas interest in London continue. The firm also predicts that the level of investment activity in the City and West End markets during 2014 will remain much the same as last year with the only constraint on investment being the supply of available properties.
Mat Oakley, research director at Savills, added: 'When assessing asset performance, rental growth will now drive returns rather than further yield compression, albeit in prime markets particularly for trophy City buildings and West End retail, further yield hardening may occur.'