London rallies at year-end: C&W

London has recorded its third consecutive quarter of rising investment in commercial property according to new statistics from property adviser Cushman & Wakefield. In Q4 investment volumes rose to just over £3bn (EUR 3.3 bn), up from £1.602 bn in Q3, for an annual total of £6.81 bn. Although 2009 marked the first time since 2006 Q4-2007 Q2 that London investment has risen for three consecutive quarters, the year's total remained short of 2008’s total of £6.99 bn and came to just 35% of 2007’s record total of £19.42 bn.

The overall annual decline was attributed to the continuing economic downturn and the shortage of supply of assets on the market. The main sources of supply including REITs and funds were largely out of the market for 2009 and the expected sell-off of distressed assets by the banks did not materialise. Demand did increase through the year, however, which encouraged more sellers and quarterly volumes therefore rose from just £679 mln in Q1.

The West End market in 2009 saw £3.095 bn of volumes, slightly down on 2008’s total of £3.53 bn. The City & Docklands market in contrast had a better year than 2008 with £3.7 bn invested against £3.46 bn. Turnover in the final quarter of 2009 was more than three times greater than Q4 2008 and dominated by the acquisition of HSBC tower, Canary Wharf at £772 mln and 88 Wood Street EC2 for £183 mln by the Korean National Pension Fund and 5 Churchill Place, Canary Wharf by an un-identified overseas private investor for £208 mln. Overseas investors accounted for 73% of all purchases in 2009, thanks not least to the weak sterling.

Bill Tyser, head of City investment, Cushman & Wakefield said: 'The outlook for 2010 is certainly for investor appetite to continue. It remains to be seen where the buying opportunities will come from but there is a sense that more stock will come from the banks which will see the benefit of hardening yields and rising prices as an indicator to reduce some of their exposure. The reduction in the number of transactions in 2009 - 67 against 75 in 2008 - has highlighted this general lack of product in the market which has been available for the increasingly international and latterly national appetite as the UK REITs and UK institutions have re-emerged as potential buyers. This has been evidenced by the acquisition of 90 Queen Street by GPE for circa £46 mln and an 8.2% yield and 55 Gracechurch Street acquired by BP Pension Fund for circa £27.7 mln/8%.'