Investment activity in London's commercial property market continued at a high level in the second quarter, with £2.78 bn (EUR 3.3 bn) transacted in the West End, City and Docklands markets, according to new statistics from property adviser Cushman & Wakefield. This marks a 70% increase on the previous quarter and a 94% increase year-on-year.
Investment activity in London's commercial property market continued at a high level in the second quarter, with £2.78 bn (EUR 3.3 bn) transacted in the West End, City and Docklands markets, according to new statistics from property adviser Cushman & Wakefield. This marks a 70% increase on the previous quarter and a 94% increase year-on-year.
Figures have risen for the fourth consecutive quarter, with £4.45 bn worth of property deals being transacted in central London so far this year, more than double the figure for the same period last year (£2.11 bn). C&W said a further £1.1 bn worth of deals is under offer which is expected to complete in Q3.
Strong rental growth predictions, sterling’s devaluation against the US dollar and the uncertain economic environment are all making London property attractive to overseas investors, C&W said. Middle East and Asian investors are particularly active, as evidenced by the sale of the Knightsbridge estate to the Saudi Arabian Olayan Group - which makes up almost one third of West End investment in Q2. Overseas investors as a whole accounted for 60% of deals in Q2.
In a further boost for the market, it was announced last week that Mitsubishi Estate Company has sold Bow Bells House in the City for £140 mln to an overseas private investor in order to unlock funds for a new development drive in the capital.
Investors consisted mainly of overseas purchasers with UK funds and property companies also active. The main sellers were international funds, particularly German funds. Key Q2 deals include: 30 Finsbury Square, sold by DEGI to MEAG - both German funds - at a yield of 5.58% and £102 mln; and Grovernor’s House, 5 Laurence Pountney Hill, sold by German fund GLL to a private Greek investor, at a yield of 6% and £86 mln. This is the third time this property has been traded since the summer 2007
In the West End, 37 deals totalling £1.68 bn worth of properties sold during Q2 2010 - an increase on £1.06 bn in Q1 and a 95% increase year-on-year. Overseas investors accounted for the majority of deals, with prime retail assets top of their shopping list. There was some buying activity from UK funds, such as Aviva's purchase of 25 Soho Square but their appetite is becoming more selective as prices rise.
Major Q2 deals include: Knightsbridge Estate, sold by Avestus Capital Partners to the Olayan Group for circa £600 mln; 2/16 Baker Street, sold by McAleer & Rushe to British Land for £30 mln, in a return of speculative development and the acquisition of 56-62 Beauchamp Place and 321 Oxford Street, with these transactions reflecting low yields around 4%.