Publication

West End Investment Watch - May 2015

Research Article

Contacts & Related Articles

April sets Q2 off with a bang.

Market comment and notable deals

■ April saw volumes of £1.42 billion over 13 transactions, 50% above the total volume recorded in Q1 within just one month and already 82% of the total recorded over the whole of Q2 2014.

■ In the West End’s largest transaction since August 2013, a joint venture between Land Securities and Frogmore has sold Oriana, their substantial retail holding to the east of Oxford Street for £435 million. The interest was bought by Ponte Gadea, the investment company of Amancio Ortega, the world's fourth richest individual. This was Ortega’s fourth known purchase in Central London within the last 18 months.

■ On behalf of Employees Provident Fund (EPF), Savills has sold the landmark Paddington building 1 Sheldon Square. The freehold interest totals 195,381 sq ft of office accommodation and is single let to Visa until December 2022 at a passing rent reflecting £48.78 overall.

The property was sold to British Land for £210 million, reflecting a net initial yield of 4.45% (SPV) and a capital value of £1,075 per sq ft. There were seven under bidders with four offers in excess of £200 million in the second round of bidding.

■ UBS Global Asset Management on behalf of a private Asian mandate has purchased 95 Wigmore Street for £222.4 million, reflecting a net initial yield of 3.44% and a capital value of £2,160 per sq ft. The newly developed property was owned by Great Portland Estates and Aberdeen Asset Management and comprises an office and retail building totalling 102,954 sq ft. The property attracted strong interest with 11 out of the 12 first round bidders offering in excess of the £191 million guide price.

■ On behalf of Hermes, Savills acquired 26-28 Hammersmith Grove, a freehold office investment for £131 million, reflecting a net initial yield of 4.2% and a capital value of £640 per sq ft. The property is currently let to 21 tenants off a low average passing rent of £27.95 per sq ft and offers short term asset management and longer term development angles.

■ We have observed over £500 million of UK institutional purchases so far this year which is already 70% of the average five-year take up by this purchaser type as seen in Graph 1. With capital inflows showing no sign of slowing in the short term it looks probable that UK institutional purchases could exceed the 2014 total of £1.29 billion well before year end.

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Graph 1

GRAPH 1UK institutional annual transaction volumes

Source: Savills Research *Data as of May 2015

■ Savills prime hypothetical West End yield remains at 3.25% with the IPD average equivalent yields currently standing at 4.76% (March 2015) as seen in Graph 2. We anticipate IPD yields to be driven down over the quarter, as well as our own prime yield.

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Graph 2

GRAPH 2West End yields

Source: Savills Research

■ Savills has been involved in 25% of transactions within the West End in 2015 to date and 28% this month alone. We are currently marketing in excess of £300 million of assets and are confident of further success within the team this year.

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Table 1

TABLE 1Key deals in April 2015