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Central London commercial property market remains robust
Cushman & Wakefield report increased investment volumes despite economic uncertainty
Article posted: 11 Jan 2012
The Central London commercial property investment market remained robust in 2011, despite widespread economic uncertainty, according to Cushman & Wakefield. Total investment volumes totalled £10.9bn for the year. This represents an encouraging jump on 2010's total of £9.9bn, confirming the Capital's standing as a relatively safe and stable home for equity in an uncertain economic environment, where returns from other asset classes remain extremely low.
Demand from foreign high net-worth individuals, particularly those from the Far-East, continues to be strong.
Bill Tyser, Head of City Investment at Cushman & Wakefield said, "With continued ultra-low interest rates, further geo-political unrest and relatively weak Sterling, there is no reason to believe that there will be any let-up in interest from international investors into the Central London market, which will continue to be considered as a 'safe haven'. We are expecting to see a number of European funds sell assets and further potential profit-taking by those investors who bought early in the market in 2008 and 2009."
Rents for prime office space in the West End jumped 7.9% year-on-year, ending December 2011 at £102.50 per sq ft - up from £95 per sq ft in December 2010. Yields for prime retail and office remained stable, at 4%.
The City & Docklands investment market ended the year in a bullish mode. There was £1.75bn of transactions in Q4 2011, comprising 27 deals. This represents a sharp increase on the previous quarter (£796m/ 18 deals) and is up year-on-year (£1.36bn/ 20 deals). In total, £6.3bn was transacted, through 108 deals, in the City & Docklands in 2011. This compares favourably to £4.7bn in 2010.
During the year there were just under 20 transactions in the City & Docklands in excess of £100m, five of which occurred in Q4 2011. Overseas funds made almost half of all purchases in the quarter (44%) with international private investors accounting for 27%. Rents for prime office space in the City remained stable at around £55 per sq ft, and yields at 5%.
Key deals in the City & Docklands for Q4 2011 included: the sale of Tower 42 to Nathan Kirsch for £282m at a net initial yield of circa 6.9%; the acquisition of Milton & Shire Houses, 1 Silk Street, for £350m, at a yield of 5.4%, by the Asian Sovereign Wealth Fund, PNB; and the purchase of 60 Threadneedle Street, a Hammerson multi-let redevelopment, by St Martin’s Property Corporation for £186m, with a yield of circa 4.65%.
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Posted by Sam
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