Not so long ago £700 per sq ft would have represented a respectable investment value for a London City office and today this is what is being achieved for offices purchased with vacant possession (VP). VP values for City offices have seen a marked increase with recent deals trading in excess of £700 per sq ft. Savills research shows a £240 increase on the average value per sq ft since 2014 with figures today more than double those achieved in 2010 (£300 per sq ft).

A good example of this is the recent sale of 24-30 West Smithfield in Farringdon which Savills sold on behalf of the former owner occupier for £735 per sq ft after receiving 25 formal offers. Other examples include the freehold of 23-39 Eastcheap, EC3 which sold in March 2015 for £772 per sq ft, 150 Holborn, EC1 which achieved £715 per sq ft and 25 & 28 Easton Street, WC1 which was sold for £794 per sq ft.

A combination of factors is driving the increase including a falling vacancy rate across the Central London office market, rising rents and the increased availability of finance for speculative refurbishment schemes as appetite for risk increases. Also, VP schemes offer investors the option to refurbish and re-deliver a building to the market within half the time a ground-up development would normally take.

Further information

Read the latest Savills City Investment Watch.