Weight of Money Still Strong as UK Investors Increasingly Active - Cushman & Wakefield

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Weight of Money Still Strong as UK Investors are Increasingly Active

Central London investment activity totalled £9.1 billion in the first half of 2015, which is the strongest first half volumes since the first half of 2007 — according to research published today by global real estate adviser Cushman & Wakefield (C&W).

Q2 volumes moderated slightly quarter on quarter at £4.4 billion, but remained some 6% above the 5 year quarterly average and 10% above the same period in 2014. Investment activity in the City was relatively subdued but the West End market was comparatively more active, in terms of both the number of transactions and the volume of stock coming onto the market. City volumes were at their lowest level for eight quarters, at £2.1 billion, whereas the West End saw volumes reach £2.35 billion, 37% above the 10 year quarterly average and an increase of 75% quarter on quarter.

Investment transactions were split evenly between the City and West End- with an average transaction size of just £52 million and £78 million respectively- which reflects the lack of large scale stock particularly in the City market.  The city investment market activity was fuelled by transactions between £10-£20 million, with relatively few large core transactions signing this quarter; in fact in Q2 there were equal numbers of completed transactions in the West End and City in excess of £100 million.  

James Crawford, Head of City Investment, commented: “Demand remains strong for larger lot sizes but activity is dictated by the number of properties on the market. We expect larger lot sizes to be brought to the market as pricing levels increase and investors look to take the profit from their property holdings. “

Domestic purchasers were more active this quarter accounting for half of investment volumes which was the highest proportion for nearly four years. In general, UK investors were more active in the West End, where they accounted for 65% of total volumes- but their focus has been on non-core locations with property in Hammersmith in particular popular this quarter.    

Richard Womack, Head of London West End Capital Markets, commented: “UK funds can afford to be more competitive in areas outside the traditional core locations, while at the same time recognizing the value and future potential of these areas.”

Investors are increasingly moving up the risk curve to seek returns by looking for opportunities to add income and value. This is reflected in an upturn in the number of multi-let properties – accounting for half of all transactions by number in Q2 which is ahead of the 5 year average of a third. We are also seeing a trend for assets to be bought with short term income, with almost a third of all properties bought this quarter having a WAULT of less than five years, while a quarter of properties had vacant possession. 

James Beckham, Head of London Investment, commented: “Looking ahead, it will be interesting to see how the market reacts to the uptick in swap rates and whether this has the effect of taking some of the exuberance out of the market.”

CITY & DOCKLANDS – Q2 2015 TOP 5 TRANSACTIONS BY VOLUME

ADDRESS

£ VOLUME

PURCHASER

VENDOR

The Walbrook, 23-29 Walbrook

£575.00 M

Cathay Life

Delancy / Minerva

Bankside Quarter

£308 M

Native Land

Temasek

Hotel Properties Limited

Amcorp Properties

Carlyle

Watermark Place, 90 Upper Thames Street

£255.00 M

Union

Oxford Properties

City Place House, 40 Basinghall Street

£190.60 M

Great Portland Estate

Starwood

99 Bishopsgate

£162.50 M

China Life  JV with Canary Wharf and Qatari

Brookfield

WEST END – Q2  2015 TOP 5 TRANSACTIONS BY VOLUME

ADDRESS

£ VOLUME

PURCHASER

VENDOR

95 Wigmore Street

£222.4 M

UBS Global Asset Management with Asian money

GPE / SWIP JV

1 Sheldon Square

£210 M

British Land

Employees Provident Fund, Malaysia 

1-5 Howick Place

£210 M

Verwaltungsgesellschaft für Versorgungswerke (VGV)

Doughty Hanson and Urban & Civic

Translation Building, Imperial West

£152.5 M

Aviva

Imperial College

Portfolio incl Kings Mall Shopping Centre/1 Lyric Square

£153.0 M

Schroders

Matterhorn Palos Partnership

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