Over £3 bn of City offices for sale in London

Over £3 bn (EUR 3.4 bn) of office real estate is up for grabs in the City of London as owners seek to take advantage of a gradual recovery in the market, according to Andrew Hawkins, head of JLL's City Investment division. 'We expect investment volumes to be up by almost 50% in the first half of 2010,' he said.

The largest portfolio up for sale is Simon Halabi's Thames Portfolio which is selling for a price of £466 mln. The largest single asset is Commerz Real's 10 Aldermanbury property, which is on the market for £260 mln (EUR 300 mln), or a yield of 5.5%.

In addition to 10 Aldermanbury, Alban Gate and 60 Victoria Enbankment are being marketed through CB Richard Ellis and Knight Frank. Alban Gate is believed to be selling for £275 mln or a yield of 6.15%. Meanwhile, German fund manager Degi is believed to have reached an agreement to sell the 30 Finsbury Square office scheme in the City of London for over £100 mln (EUR 115 mln), reflecting a yield of 5.5%.

JLL's Hawkins is predicting a sharp improvement in rents in the City owing to a shortage of new office space. 'We are forecasting a 50% growth in rental levels with prime headline rents surpassing those of the market peak in 2007,' Hawkins said. 'Compared to other European cities such as Paris or Frankfurt, London is showing the strongest rental growth,' he added.

JLL expects rents to rise from £45 per sq ft, reaching a peak of £70 per sq ft in the course of the next three years. The recovery in the City occupier market has been driven by record state support to the financial sector in 2008 and 2009. 'Not surprisingly, the banks were the first occupiers to stabilise. Now that they are making profits again, they can make occupational decisions and try to take advantage of a collapse in rental values which fell by 30-40% over the crisis,' he said.

In terms of rental take-up, the first quarter of 2010 represented a 10-year record, with over 2 million sq ft being leased in the first three months of the year. The figure was the highest on record since the fourth quarter of 2000.