London office news 25th January 2013

The Central London office investment market witnessed the third highest transaction volumes on record in 2012, according to CBRE.



After recording £3.5bn in sales in the final quarter, CBRE said the year as a whole had recorded £14bn, only beaten in the past by the £17.5bn seen in 2007 and £15.5bn in 2006. The biggest deals of the year are shown in the attached CBRE graph.



The figure was drive CBRE said by London’s popularity amongst overseas buyers, who accounted for 67% of turnover in 2012. The agent expects this interest to remain strong in the coming year, although a lack of available prime stock may constrain purchases. Nevertheless, pressure on prime yields is expected to continue.



The Central London property investment market grew by 55% in 2012, with activity in the City contributing £7.2bn to this figure (more than double the £3.5bn seen in 2011). Midtown was similarly active, recording its most successful year since 2005 (£1.6bn), while the West End contributed £4.4bn.



The occupational market was more subdued as a result of the Eurozone crisis CBRE said, with overall take-up for the year finishing at 9.8m sq ft against a long-term average of 11.8m. However, CBRE expects the projected increase in consumer and business confidence in the second half of 2013 to filter through to the occupier markets and relieve some of the pent-up demand.



The growth should also be reflected in a recovery in take-up, and renewed rental growth. A number of high profile lettings in the City sub-market resulted in a quarter-on-quarter rise of 89% in the final months of 2012. Simon Barrowcliff, executive director, Central London Capital Markets, said: “2012 saw the continued trend of high levels of overseas capital entering the Central London market, and in particular that of new foreign buyers, accounting for 20% of total volumes last year.

 

Activity in late 2012 and early 2013 points to a continuation of this theme, and it is likely that overseas investors will continue the more recent trend of taking higher levels of risk. Furthermore, the lack of available investment stock in the prime sector is likely to maintain premium pricing.”



Michael Edwards, executive director, Central London Capital Markets, said: "In 2012 we saw the third highest turnover of any year at £14bn (compared with £17.5bn in 2007 and £15.5bn in 2006). “But if you consider the prevalence of high levels of debt at the top of the market, compared with more limited availability last year, this actually means that 2012 arguably saw a greater investment of equity in Central London than ever before."