Commercial property market momentum disrupted in April

Colliers May Property Snapshot records a slowdown in office space transactions

Article posted: 15 May 2011

The excellent weather, the long Easter break and the royal wedding seem to have disrupted whatever momentum may have been building in the commercial property market according to Colliers' May Property Snapshot. Nevertheless, Property Data figures suggest that, despite the slowdown, April transactions were generally in line with April 2010.

Year-to-date investment volumes are still up by 45% on 2010 with around £11bn transacted so far, although many Q1 2011 deals were ‘overhangs’ from 2010. Consensual and receivership sales continue, with the last of the Halabi portfolio being sold. Administrators are also selling assets from the Kenmore Property Group, and Lloyds is reported to have 38 properties worth around £60m on the market at a collective yield of 9%.

Office space in the City of London at Aviva Tower (the last of the Halabi portfolio) was sold by receivers to a foreign private for £288m at an initial yield of 5.4%. Foreign private investors are actively looking for smaller lot sizes as evidenced by bidding on 38 Threadneedle Street which was offered at 5.3% yield and is under offer at 5% (£22m).

Few deals completed in April on offices in the West End, although interest remains high for sites with redevelopment possibilities. Regionally there is little large-scale activity, although the £127.1m sale of The Mailbox, a mixed use scheme comprising 640,000 sq ft of retail, restaurants and office space in central Birmingham, was completed. Also in Birmingham, Hines confirmed that it acquired and will fund the completion of Phase 2 Snowhill.

Headline prime rents for office space in the Square Mile remain stable at £57.50 per sq ft. The highest quarterly take-up of office space in the West End in four years was reported in Q1 2011, although the figures are skewed by a few large deals. Lettings have been agreed at Hine’s 1 Grafton Street in excess of £100 per sq ft. Regionally, Q1 2011 take-up figures are generally flat as the leasing markets remain sluggish. The impact of public sector employment cuts is already apparent, although there are numerous private sector ‘requirements’.

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Posted by Ingrid