Central London property still in demand among overseas investors – Cushman & Wakefield

Central London commercial property remained highly attractive to international investors in the first quarter of 2013, says Cushman & Wakefield, which has calculated that a total of £2.75bn was transacted, with overseas investors accounting for 71% of this. The total volume was down almost a third from the £3.98bn in the final quarter of 2012, which Cushman & Wakefield says reflects a lack of available Central London property. This particularly held back volumes in the West End.

Transactions involving City property and property in the Docklands reached £1.77bn in Q1 2013 across 22 deals, with overseas investors accounting for £1.56bn of the total. The average transaction size was dramatically smaller for the 13 UK investor deals done, at just £16m, compared with an average of £175m for the nine deals done by overseas investors. This reflects the fact that four overseas transactions accounted for 75% of overall volume, amounting to £1.35bn. These were the purchase of Ropemaker for £472m (5% Net Initial Yield); St Martins (KIA – Middle East) acquisition in Canary Wharf of 5 Canada Square for c.£383m (5% NIY); Ivanhoe Cambridge’s (Canada) purchase of Woolgate Exchange for c.£265m (5.95% NIY) and Deka’s (Germany) Southbank acquisition of Palestra for £225m (5.1% NIY).

Bill Tyser, head of City investment at C&W, says that while there are some concerns about the lack of available stock to meet intensifying demand, “there are also signs of profit-taking emerging from investors who acquired property at the beginning of this ‘crisis cycle’.”

In the West End, turnover reached just £965m across 33 transactions, down from £1.21bn (40 deals) in the final quarter of 2012. Demand for West End property remains strong, with more than £400m of investment stock understood to have exchanged by the end of Q1 2013 and another £1.46bn under offer. Overseas investors accounted for more than half of the purchaser volumes in Q1 2013.

Mike Tremayne, head of West End investment at C&W, says overseas and domestic investors alike are seeking to benefit from the “underlying positive occupational demand, strong liquidity and general ‘safe haven’ qualities the West End has to offer”.