Scottish Widows Investment Partnership (SWIP) is to acquire Halsbury House, a central London office property, for £35m. SWIP spokeswoman Beth Cameron said the current tenant, Reed Elsevier subsidiary Lexis Nexis, would continue as the building’s sole tenant.
The yield on the property stands at 5.4%, compared with SWIP’s five-year forecast yield of 6.5% for the commercial property market as a whole and 7.5% for the City office sector. In a December statement, SWIP head of property Tom Laidlaw said the UK commercial property market had peaked and predicted lower – though still positive – returns before bottoming out in 2007 or 2008. City rents will begin to drop in 2010, said the firm.
The acquisition reflects SWIP’s strategy to build up its Central London portfolio holding at the expense of high street retail properties – although it believes the retail warehouse sector, including fashion parks, has considerable long-term potential.
As SWIP announced the acquisition it also completed the sale of two retail holdings in Edinburgh and Chelmsford for a total of 34.4m.
The acquisition and divestment reflect the firm’s conviction that in the short term mileage in the UK property market lies exclusively in the Central London office market. Currently its office weighting stands at 19.9%, compared with 23.78% in high street retail. The fact that it is relatively overweight in retail against its own short-term forecasts suggests that further divestment is a possibility.