Publication

City Investment: Market Watch - March 2015

Continued investment demand results in total turnover up by 7% on last year.

■ February turnover was £579 million across 12 deals, resulting in the year-to- date turnover reaching £1,093 million, which is 7% up on this point last year.

■ The largest transaction of the month was the £94 million purchase of the long leasehold in Senator House, 85 Queen Victoria Street, EC4 by Legal & General. The 155,153 sq ft multi-let building gives a yield of 6.6% and a capital value of £606 per sq ft.

■ So far this year, UK purchasers have accounted for the majority of turnover (36%), closely followed by US purchasers (24%) and Asian purchasers (17%). UK purchasers have also completed 10 of the 24 transactions so far this year.

■ Whilst certain UK funds have an appetite for larger lot sizes, their average purchase price is £35.59 million so far this year, compared with £85.63 million for US purchasers, £62.38 million for European, and £60.37 million for Asian purchasers. As the year progresses it is likely the average purchase price of both US and Asian purchases will rise as large lots are released to the market.

■ So far this year, we have seen the highest number of transactions within SE1 being five, with a combined total value of £102.45 million. This is compared with four transactions being completed in EC4 so far this year totalling £433.85 million.

■ In 2015, the average FH yield in the City Core across the four deals where the yield is known is 4.5%. This is compared with the average LLH in the City Core of 5.8% across the five deals where the yield is known.

■ The Walbrook is currently the largest lot size available being marketed at £580 million, and reported to be under offer to Cathay Life. The 440,565 sq ft building is multi-let to seven tenants including JLL, Den Norske Bank and Vanguard producing a yield of 4%.

■ Savills prime yield is still 4.25% for the third month, which fell 50bps since the end of 2013.

click on images below to enlarge

Graph 1

GRAPH 1City Turnover

Source: Savills Research

Graph 2

GRAPH 2City Turnover by Nationality

Source: Savills Research

Table 1

TABLE 1Key Deals in February 2015

Source: Savills Research