We recorded just 13 transactions totalling £375M of volume either exchanged or exchanged and completed in the first three months of 2023. To put this in context, if we take the 10 year Q1 average, it stands at £1.4Bn and 25 transactions – so we are running at 25% of typical volumes. Q1 2022 was also around £1.4Bn.

There are some key takeaways if we analyse the transactions that have occurred, but before we set these out, it is worth pointing out that the historically low volume probably isn’t representative of the West End market as we are tracking around £1.1Bn of stock currently under offer.

Much like the Railways have in the past blamed “the wrong type of snow”, we seem to have the “wrong type of stock”. Quality core buildings with income are selling well. Pontegadea bought 33 Foley Street in March off Abrdn who launched the asset for sale in January. The freehold building was let to Kier (who have sublet entirely) until December 2042 at c £90psf with RPI reviews. The price paid - £82M and 4.3% is probably close to a record for Fitzrovia at just over £1,900 per sqft. Similarly assets that are now under offer – Film House on Wardour Street, and 20 Rathbone Place both represent high quality assets which have attracted significant interest. However there is a notable absence of similar buildings on the market.

Q1 2023 has missed out on any major transactions to bolster the numbers - the largest transaction being on the seemingly unflappable Bond Street where Chanel sold No 27, let to Alexander McQueen and Chanel, for £140M reflecting 2.64% net yield. Along with Foley Street these two transactions made up 60% of the volume for the quarter.

After Allsop’s sale of 7 Ridgmount which exchanged before Christmas but completed in March, the most closely watched value add opportunity was at 55 Tottenham Court Road. This comprises a Freehold c 50,000 sqft block with the Ground Floor let to M&S Simply Food, and the vacant uppers representing an opportunity to refurbish and extend the 32,000 sqft former police station into offices. There was consent to change the use back to offices, but the additional massing was proposed but not consented. The building was launched to market in July 2022 for £52.0M £1,032 per sqft and placed under offer over the summer. Following Liz Truss’s short stint as PM and the ensuing turmoil, the buyer pulled out. Perhaps symptomatic of the market sentiment, the vendors failed to attract interest for the rest of the year, then in January indicated a c 15-20% price drop would be considered – which resulted in “best bids”. The Ofer Family’s Global Holdings ultimately bought the asset for £41M in late February representing £820 per sqft and around a 20% discount. Rents have remained strong, and construction costs inflation is probably close to peaking, so the discount in pricing can be entirely explained through a change in exit yield on buyers’ development appraisals largely driven by the change in cost of money.