West End Investment Market
2019 was characterised by reduced transactional volumes across central London due to a shortage of quality stock and a backdrop of political uncertainty, which encouraged a ‘wait and see’ approach amongst investors, both buyers and sellers alike.
London’s West End market recorded a total of £1.9Bn either exchanged or exchanged & completed in 31 transactions during Q4 2019. The average transaction size was just over £63M, which is particularly skewed this quarter by 5 transactions over £100M, which made up c. £1.2Bn or 62% of the total: The Post Building (£610M to Ponte Gadea), Holborn Links Estate (£245M), Orion House (£130M to K&K Property Holdings), Harrington Hall Hotel (£130M to a Joint Venture between APG & London Central Portfolio) and Portman Square House (£100M to AXA IM).
This brings 2019 total west end volume to £5.3Bn in 97 transactions, with an average transaction size of £55M.
2019 volumes are notably down on 2018, however the fourth quarter was, as per the market norm, the busiest quarter of the year and illustrates sustained investor appetite for London’s West End market, and encouragingly Q4 volumes were 12% ahead of Q4 2018.
Overseas capital throughout 2019 has continued to show confidence in West End investment opportunities, despite the well-publicised political uncertainty, with these investors accounting for 60% of market activity. Notably, 73% of the year’s top 12 deals recorded (all over £100M), which make up 50% of total 2019 volumes, were bought by overseas capital. The geographic origin of this weight of capital is diverse, and has been dominated by Asian, European (excluding UK) and America investors (55%) this year, with Middle Eastern investors notably absent. Non-UK investor demand has remained robust, (particularly for large prime lot sizes offering secure income, minimal capital expenditure and a relatively hands-off asset management strategy), due to the market environment of low interest rates, weakened sterling and a healthy debt market. These economic factors, combined with a resilient occupational market, have contributed towards stable prime yields remaining at 3.50%.
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