August records highest turnover since 2021
August saw the highest volume of investment turnover so far this year, with £730 million recorded across nine transactions, unusual for a month typically associated with a slowdown in activity. This was the highest August volume since 2021 and accounts for a quarter of the year-to-date (YTD) total. Investment volumes this YTD have reached £2.94 billion across 68 transactions. Compared with the five-year average, this represents a 7% decline in turnover volumes and just 3% by the average number of transactions.
The largest trade of the month – and the largest single-asset transaction since 2022 – saw KKCG / Yard Nine acquire the freehold interest in 1 St James’s Square, SW1, for £291 million (4.79%, £2,807 psf) following a competitive bidding process. Located on a prime garden square, the 103,000 sq ft building currently serves as BP’s London headquarters and benefits from planning permission for a comprehensive refurbishment once vacant possession is achieved in April 2028. The proposed scheme looks to increase the floor area by 17% and create a best-in-class, BREEAM ‘Outstanding’ building in one of the most undersupplied submarkets. The transaction highlights how prime garden square locations can still attract continued demand from global investors, especially where rental growth prospects are supported by very limited future supply.
In another significant core West End trade, Savills advised Joint Treasure on its disposal of 10 Stratton Street, W1, for £90.75 million, reflecting 4.17% and £2,250 psf. The 41,577 sq ft building was acquired by Oval Real Estate and Strategic Value Partners and is multi-let to eight tenants, with a highly reversionary average passing rent of £90.57 psf and a WAULT of 1.4 years to breaks, providing an opportunity to create value through redevelopment.
In a similar theme, Arax Properties acquired 16 Berkeley Street, W1, from BEAM for £81.50 million (2.89%, £2,036 psf). The mixed-use asset comprises 40,024 sq ft of office and retail accommodation let to a serviced office provider and a gym operator with a WAULT of almost 10 years, providing long-term reversionary income, subject to uplift from outstanding rent reviews.
All three transactions demonstrate continued investor demand for prime West End locations, particularly against a backdrop of macroeconomic uncertainty, with 78% of turnover this month concentrated in Mayfair and St James’s.
Outside the core, Take-Two Interactive acquired its European headquarters at 30 Cleveland Street, W1 for £64.50 million from Blue Coast Capital, continuing the trend of owner-occupier acquisitions which have accounted for 12% of transactions by number this year, as rising prime rents, falling vacancy and constrained future pipelines support the case for ownership.
This focus on prime locations is also reflected in the deals agreed this month. Eleven assets totalling £271.6 million went under offer, which included two in St James’s: 24 St James’s Square, SW1 (Q. £62 million, 3.71%, £3,502 psf) and Schomberg House, 80–82 Pall Mall, SW1 (Q. £57 million, 5.25%, £1,529 psf). Overall, Savills is tracking £1.68 billion under offer across 37 assets, down 4% year-on-year by volumes, with c.£500 million having been under offer for more than three months.
The final quarter is often the busiest of the year, having made up 43% and 32% of full-year volumes in 2023 and 2024, respectively. Last year was an exception, owing to two large portfolio deals that traded in the first quarter. However, inflationary pressures and a steady rise in the SONIA 5-year swap rate pose risks to future activity levels, with some investors choosing to retain a cautious approach in deploying capital. Transaction times have, as well, continued to lengthen, with over three quarters of the £2.5 billion of assets marketed in H1 remaining unsold.
Our West End prime yield remains, for now, at 3.75%, with the Bank of England base rate at 3.75% and the SONIA 5-year swap rate at 4.55%. In view of recent sentiment, we believe there is upward pressure on yields.