City investment hits £5bn in H1

By James Buckley - Monday, July 24, 2017 13:45

Commercial property investment in the City of London reached £4.98bn in the first six months of 2017 – 17% up on H1 2016, according to research from Savills.

The international real estate advisor says 64 deals were transacted in H1 2017, with an average lot size of £77.8m.

Demand for trophy assets remains strong this year, says Savills; the ten largest deals transacted in 2017 to date total £3.4bn, compared with the ten largest across the whole of 2016 which totalled £3.1bn. With more trophy assets expected to be traded in the second half of the year, Savills says it is almost certain 2017 total turnover will surpass 2016.

According to the research, Asian investors have continued to be the most active in the market, accounting for 50% of turnover in the City in H1 2017, with an average deal size of £147.39m.

While European investors were responsible for only 25% of turnover, their average deal size was larger at £205m, says Savills.

UK investors were responsible for 16% of turnover, while activity from both US and Middle Eastern buyers has been relatively muted in 2017 to date at just a 4% share each, says the firm.

Felix Rabeneck, director in the City investment team at Savills, said: “The City continues to have global appeal to investors with Asian buyers the most active, but interestingly, on average, European investors are striking the biggest deals. We expect the momentum seen in the first six months of the year to continue into the second half, with 2017 investment volumes overtaking 2016.”

In the first half of the year, Savills has been involved in £2.1bn worth of transactions in the City across nine deals.

Notable deals transacted in June included Deutsche Bank AG's asset management arm acquiring 2 & 3 Bankside, SE1 for £310 million, at 5.01% and £747 per sq ft, which is let to RBS and sub-let in its entirety to Omnicom.

The combined 415,155 sq ft long leasehold buildings currently have a WAULT of 10.5 years. The transaction was structured to include a second tranche payment reflecting the anticipated increase at the September 2017 rent review, which is to be capitalised at 5%.

Savills prime City yield remains at 4 %. The spread between the City and the West End is 75bps with the West End prime yield currently at 3.25%.

jbuckley@costar.co.uk

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