Prime City and West End properties still in demand – Savills
Savills has noted sustained “and possibly increasing” demand for Grade A City of London commercial property from overseas investors, particularly from Asia. It expects this to maintain prime yields for such properties at 5.25% and says they could be pushed lower in some cases to 5.0%.
The firm notes that some properties have been withdrawn from the market, however, as vendors’ price expectations have not been met: it also notes the widening gap between prime and secondary assets. “In the past eight weeks we have witnessed a fall in the pricing of assets that require more active management”, it adds.
The limited number of City commercial properties brought to market in January is not unusual, Savills says, and it expects a number of new opportunities to come to the market shortly, as owners finalise their strategies for the year. It says there is currently £2bn under offer in the City – much of this was agreed in 2011, and the firm says this shows the extended time that deals are now taking to complete.
Investment market activity is starting to pick up in the West End of London, after a typically muted start to the year in January with just eight transactions recorded accounting for £322m, all of which were legacies from 2011. Half a dozen deals of more than £25m are pending, Savills says. While banks are not major owners of assets in the West End, the firm thinks that bank de-gearing activity appears to be on the increase. Savills expects robust pricing for prime West End retail and residential properties to continue in 2012, while secondary and tertiary office sales “are likely to be more challenging”.
