London property news 3rd July 2015

Investment into central London commercial property could break records this year with volumes reaching £9.4bn in the first half of 2015, says DTZ.

The H1 total has only been exceeded twice, in 2004 and 2007. It also dramatically surpasses the equivalent figure from 2013 which saw £6.1bn invested in what went on to be a record-breaking year.

The number of commercial property sales worth over £100m is also increasing with 24 sales taking place over this value in the first six months of the year. This is up on the same period last year – 18 sales – and in 2013 which saw 15 sales over £100m.

This year’s large investments include Taiwanese Cathay Life Insurance’s acquisition of the Walbrook Building, near the Bank of England, for £575m – the biggest single-property purchase in the capital this year. Meanwhile another Taiwanese firm, Taipei-based Fubon Life Insurance bought the site of Madame Tussauds waxworks museum for £349m.

International purchasers have remained extremely active in the first six months of 2015, accounting for £6.2bn of 2015’s investment volume. Investors from Asia Pacific were responsible for a third of that (£2.2bn), European investors (excluding those from the UK) purchased £1.5bn, and North American investors £1bn.

The central London investment market will continue to gather pace in the third quarter with a number of significant assets currently in the market including Broadgate Quarter, which is being sold by HSBC Alternative Investments Limited and the international real estate firm Hines, and the Blue Fin Building on the south bank, where Time Inc., publisher of Marie Claire and NME, are undertaking a sale and leaseback.

Martin Lay, Head of Central London Investment at DTZ, said: “For those seeking prime assets above £200m, there remain relatively few markets in Europe that offer the size and liquidity of central London. The sheer weight of money seeking an investment home, coupled with the large lots available in central London, suggest investment volumes will remain high in the third quarter of 2015.”

Sophy Moffat, Senior Research Analyst at DTZ, said: “Real estate yields remain attractive compared to bond yields at historical lows, and real estate is increasingly prized among international investors for its ability to pay a stable and attractive income. One factor in play is that central London still offers good prospects for investors seeking income growth: lack of supply in the capital is pushing prime rents to record-breaking levels, with double-digit growth forecast for the majority of central London submarkets this year.”