Investment activity in London’s West End hits 7 year low

LSH’s UK Investment Transactions report says activity levels fell to £228m in Q1 2011

Article posted: 12 May 2011

Activity levels fell to £228m in Q1 2011 in London’s West End – a low that was last seen in 2004 - according to the latest research, UK Investment Transactions (UKIT) Q1 2011, by national commercial property firm Lambert Smith Hampton.

Ezra Nahome, CEO and Head of Capital Markets at LSH, commented: “Despite there being some cash rich investors in the market, the lack of available prime assets caused subdued activity. Many banks and UK institutions have already sold prime assets in Central London and those that do still own such assets do not feel any pressure to sell them because when such assets do come to the market they are achieving strong sale prices.”

This low level of activity has led to a 30 basis point increase in yields for offices in Central London. Both the markets for offices in the City of London and Midtown continued to see yields fall as investor interest in Central London offices remained strong. In the City yields averaged 5.5% in Q1 and 5.94% in Midtown, while the West End stood at 5.53% as demand for this area still remains steadfast.

Across the UK, £8.4bn of transactions were recorded in Q1 2011, a 10% fall from Q4 2010, but some 16% up on Q1 2010. Increased activity from REITs was witnessed as they returned to the market after successful recapitalisation.

This activity included Hammerson (£277m), Derwent London (£82m), British Land (£8m) and Helical Bar (£76m). These transactions were predominantly focused on the City of London. Overseas investors accounted for 21% of activity, while UK Institutions committed £1.2bn, a 33% market share in the first quarter of the year.

Derwent London, the largest central London focused REIT, acquired 182,000 sq ft of office space in the West End with its purchase of offices in Victoria and The Network Building on Tottenham Court Road which adjoins the Group’s Qube building (pictured).

To download UKIT Q1 2011 Click here.

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Posted by Jo