West End Investment Market
The West End recorded £1.65Bn of transactions during Q1 25 either exchanged or exchanged and completed in 21 transactions with an average transaction size of £78M.
During April and May it has seen a further £500M of transactions, led by Aware Super’s acquisitions of both 11-12 Hanover Square and 15-20 Manchester Square – almost £300m combined.
Overview
The West End recorded £1.65Bn of transactions during Q1 25 either exchanged or exchanged and completed in 21 transactions with an average transaction size of £78M.
Whilst this represents the strongest quarter since the “Truss mini budget”, the stats are skewed by two Norges Bank (NBIM) acquisitions making up just over half the total: firstly, in a 25% £305.7m stake in Grosvenor’s Mayfair; secondly a 25% £570m stake in Shaftesbury Capital’s Covent Garden holdings. NBIM accounted for 53% of the total volume for the quarter. The next largest transaction was Prada buying their own Miu Miu retail store and office on prime Bond Street for £250m, c2%.
Therefore, the three largest transactions made up 70% of the total, with the remaining 18 deals working out at an average lot size of under £30m. However, it could be argued that NBIM’s combined spend whilst only two transactions was spread over a 25% stake in around 400 buildings.
Q1 volumes are already close to half of the 2024 total of £3.75Bn. The 5 years’ average of £5.1Bn and 10 year at £6.5Bn.
Depth of buyers for offices has increased significantly since this time last year, for both large and smaller assets – an example of this is 100 New Oxford Street where ultimately whilst the vendor pulled the £140m sale after experiencing net inflows, there had been close to 50 inspections and a dozen offers. One further extreme example this quarter is the marketing of Screen House, Wardour Street – broadly a prime Freehold office refurbishment with immediate vacant possession – circa £25m and £1,000 psf – which experienced 80 inspections – buyers excited by the prospect of a high-quality refurbishment and capitalising on a strong office rental market, with the eventual sale price around £31m, £1250psf.
A common theme of Q1 is the larger than average proportion of Freeholds vs Leaseholds, and the flight to core locations.
April, and the first part of May have seen another dozen transactions conclude so far – dominated by the much anticipated acquisitions by Delancey/Aware Super of 15-20 Manchester Square (£112m 5.2%) and 11-12 Hanover Square (£170M 3.86%).
Who is Active?
Two sovereign wealth funds, NBIM (Norwegian) and GIC (Singaporean) alongside Prada, made up most of the purchase volume in Q1. Otherwise, private investors tended to dominate the smaller acquisitions, with limited activity by the UK REITS. In terms of Asia based investors, CC Land sold Chapel Place, a Singaporean investor purchased a consented hotel scheme on Piccadilly and GIC completed their £100m purchase of a site in Kings Cross, targeting life sciences. REITS and funds had a large part to play in terms of sales with M&G selling two assets, plus Canada Life, Landsec, and CBREGI also selling. GPE continued its acquisition programme with the purchase of a prime office redevelopment play at Chapel Place, and Feldberg Capital bought a further office asset in Fitzrovia for Cora its Green Workplace fund. During the first part of Q2, Australian pension fund Aware Super has dominated the transaction volumes to the tune of close to £300m.
Headline Deals
CBREIM sold One Albemarle Street W1, a multilet Freehold office fronting Piccadilly for £57m c £2,000 per sq ft to CLI Dartriver representing a European family – for 4.5%. Further up the street, Graff Diamonds bought another building on Albemarle Street to add to its collection – 17 Albemarle Street is a 6,500 sq ft Freehold multilet office, £14.4m represented 4% and £2,280psf. GPE’s purchase of One Chapel Place for £56m is a further vote of confidence in best in class offices – there is a block date in a couple of years to redevelop the 35k sq ft building into a new 55-60k sq ft office building. More recently the purchase of 103-105 Jermyn Street – a freehold 17,000 sq ft office and retail building with planning to take back to frame and extend – was traded for close to £45m – implying an entry price of £2,000 psf on the consented net floor area – implying likely office rents once finished of £140+ . Allsop West End team sold two assets including 116-126 Wardour Street for Landsec – predominantly retail with part uppers sold off – for £14.0m representing just over 5%.
Direction of Travel
Any commentary on Trump and tariffs is quickly out of date however it has caused market instability. Falling interest rates should help bridge the gap between buyers and sellers on some stock. In times of instability, prime London West End commercial real estate tends to benefit from safe haven status.
We are tracking around £400m of assets under offer, including 101 New Cavendish Street - under offer to Ares reportedly for around £100m, and 11 Baker Street which is believed to be under offer to Aermont/Pat Gunne – a long leasehold repositioning play.. The above excludes the Argyll portfolio, believed to be under offer to Crosstree for a reported £330M, where 55% of the assets are in the West End.
Depth of buyers for “the right stock” is only increasing – as evidenced by the 80 inspections and dozen offers on Screen House 119-23 Wardour Street – where the winning bid of £31m represents close to £1,250 per sq ft on this refurbishment opportunity.
Since January we have seen around 40 assets formally launched for sale, around £1.8Bn of value in the West End. We are always keen to catch up to run through market opportunities.