Midtown office boom 14th January 2015

Midtown has "reaffirmed its status as central London’s most over-subscribed market" with investment transactions for commercial property in 2014 totalling circa £3.13bn, according to Farebrothers' latest findings.

The transaction figures for the year represent the highest post recessionary level, and comfortably exceeds the £2.74bn of investment recorded in 2013. A strong final quarter of the year saw £1.33bn of investment in the market, with notable transactions including Ivanhoé Cambridge’s acquisition of Stonecutter Court, EC4, Temasek's purchase of a half share of MidCity Place, WC1, CCEC’S purchase of Carmelite Riverside, EC4 and PNB’s purchase of Aviation House, WC2. All exceed £100m and were undertaken by overseas investors. Midtown also enjoyed an exceptional year for office take-up, with almost 2m (1.987m) sq ft leased, exceeding the 2013 figure of 1,935 sq ft, and representing the highest total since 2011. The top lettings in the final quarter of 2014 were Neuehouse taking 61,774 sq ft at The Adelphi, WC2, and University College London, which purchased 50,645 sq ft at Bidborough House, WC1, for £25m for its own occupation.

Farebrothers adds: "However, enthusiasm for figures which clearly highlight a burgeoning market is tempered by a now chronic shortage of supply across Midtown which may stall the area’s further growth. Availability has dropped from 4.6% at the end of 2013, to 4% at the end of 2014." There is a warning that it is not inconceivable that availability will have dropped as low as 2.5% in 12 months’ time. Even with modest levels of refurbished stock coming to the market, the current levels of supply barely make up for a quarter of the current levels of take-up.

Alastair Hilton, Investment Partner for Farebrother, said: “Appetite for assets in Midtown has been relentless and as a result of this increased competition, capital values have reached unprecedented levels. As identified above, the vast majority, over 70%, of transactions by value, have been secured by overseas investors. Whilst the mainstay of these capital inflows has been Far Eastern, the capital base remains very diverse with the UK Investor still an important component. “This investment demand is indicative of both Midtown’s current performance and its future potential and as we look ahead we expect yield levels to remain with more emphasis on income growth which in turn is supported by the restricted pipeline.”

Jules Hind, Leasing, Sales and Development Partner at Farebrother, said: “While it has been another bumper year for Midtown with investment and leasing reaching new heights, the shortage of supply is now a real concern for the market. “The perception of Midtown continues to undergo a massive transformation. Once the reserve of the legal community and an overspill, budget-friendly version of the West End, Midtown is not only on the map for the centre of London, but at its literal and figurative heart. The arrival of operators such as Neuehouse, providers of collaborative workspace and community lifestyle is indicative of the creative, young clientele who are now converging on Midtown.”