Commercial property investment in London hits six-year high - Cushman & Wakefield

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Commercial property investment in London hits six-year high

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 - Investment volumes for 2013 reach £19.9 billion, an increase of 47% on 2012

 - Highest level of Central London investment since 2007

 - West End witnesses the highest annual turnover figure on record

 - In the City & Docklands, overseas investors remain the most active accounting for 80% of transactions in Q4

Cushman & Wakefield , the world's largest privately-owned real estate services firm , has revealed there were £19.9 billion worth of Central London commercial property transactions in 2013 – the highest figure since 2007. This is a 47% increase on 2012's total of £13.5 billion.

In the City & Docklands, total investment in Q4 2013 reached £5.6 billion; this takes total investment for the area in 2013 to £11.9 billion.  From a purchaser perspective in Q4, overseas investors in the City & Docklands remain the most active accounting for 80% of market share (£4.5 billion) across 12 transactions. However, this statistic is heavily weighted by the recent purchase of More London by Kuwaiti overseas sovereign fund St Martins (Kuwait Investment Authority) for £1.7 billion and the acquisition of a 50% stake in Broadgate by GIC, Singapore's sovereign wealth fund, also for £1 .7 billion. These two transactions are the UK's largest ever commercial property deals.

The UK investor market in the City & Docklands was very active in Q4, with 26 purchaser transactions totalling £1 .1 billion; this is 19% of Q4 market volume with an average deal size of £42 million.

Total investor volume is hugely reliant of a small number of very large deals such as More London, Broadgate and the St Botolph Building (£464 million). The top five deals for Q4 2013 account for around 77% of total City & Docklands investment.

Overseas-based vendors continue to be the most active accounting for 72% of transactions, with the largest proportion (66% of total volume) being overseas property companies. UK-based vendors, mainly property companies as well (17%), account for 27% of total volume sold. It is important to highlight the apparent number of very large transactions which have mainly contributed to the total volume – this indicates a strengthening commercial property market from large international institutions.

Turnover for the first quarter of 2014 is likely to be strong in the City & Docklands market with the level of acquisitions currently under offer amounting to approximately another £1.3 billion across approximately 30 transactions.

Bill Tyser, head of City investment at Cushman & Wakefield, said: “The outlook remains for a healthy but opportunity-constrained market going forward. Whilst some concerns persist over the possibility that further yield compression is limited in light of possible bond yield increases which might result in yield expansion on the horizon, the market is now entering the era of a return to property fundamentals in light of economic recovery – principally that of property rental growth, with a controlled supply pipeline and increasing occupier sentiment, decision making and demand.

“The outlook for 2014 is positive with continued international capital inflow coupled with a strengthening UK institutional investor demand.”

In the West End market, Q4 2013 has seen £2.3 billion of turnover in 39 transactions with an average deal size of £58.3 million. This takes the annual figure for West End investment to £8 billion across 187 transactions the highest annual turnover on record. Around 75% of the volume transaction in 2013 was purchased by international investors, up from 52% in 2012 this underlines London’s truly global appeal.

In the market, Q4 2013 has seen £2.3 billion of turnover in 39 transactions with an average deal size of £58.3 million. This takes the annual figure for West End investment to £8 billion across 187 transactions the highest annual turnover on record. Around 75% of the volume transaction in 2013 was purchased by international investors, up from 52% in 2012 this underlines London’s truly global appeal.

In the market, Q4 2013 has seen £2.3 billion of turnover in 39 transactions with an average deal size of £58.3 million. This takes the annual figure for West End investment to £8 billion across 187 transactions the highest annual turnover on record. Around 75% of the volume transaction in 2013 was purchased by international investors, up from 52% in 2012 this underlines London’s truly global appeal.

Looking forward to early 2014, investment turnover in the West End is likely to start strongly with Holborn Links understood to have exchanged at £215 million.

Mike Tremayne, head of West End investment at Cushman & Wakefield, said: “The outlook for 2014 is very positive. With a continuing mismatch between high levels of investor demand and inefficient supply, we see no sign of this competitive market abating.”