Source: Savills Research
Strong market sentiment sets the scene for a busy year end
■ September saw volumes of £435m over seven transactions bringing turnover to the end of September to £5.29bn, down 5% on last year but still 16% in excess of the 10-year average (see Graph 1). Although Q3 volumes totalled just £1.26bn, the lowest recorded since 2010, sentiment remains strong for West End assets, especially core freehold income deals. With only £300m of sales landing in September, stock levels remain constrained.
![Graph 1](http://research.euro.savills.co.uk/_images/graph1(176).png)
GRAPH 1West End turnover to end of Q3
■ On behalf of a private Investor, Savills acquired 32-33 Long Acre for £20.64m. The freehold interest totals 5,551 sq ft of mixed-use space arranged over lower ground, ground and three upper floors. The retail element is let to Reebok International Limited until July 2023 at a highly reversionary rent of £455,000 pa (£549 psf Zone A) while the upper floors are let to London International Film School until March 2020 at a rent reflecting £38.75 psf.
■ The Grosvenor Estate has sold the long leasehold interest (133 years at a peppercorn rent) in 10 Grosvenor Street to a private Hong Kong Investor for £152m, reflecting a 3.7% net initial yield and a capital value of £2,346 per sq ft. The property comprises 64,747 sq ft of office and retail accommodation that is multi-let to three office and three retail tenants providing a WAULT of eight years to expiry.
■ Middle Eastern investor Blue Horizon has acquired 10 Hammersmith Grove in West London for £112m, reflecting a 4.91% net initial yield and a capital value of £912 per sq ft representing the property’s third trade in the last 12 months. Newly developed in 2013 the property comprises 122,744 sq ft of office and restaurant accommodation with a weighted unexpired term of just under 10 years. The long leasehold interest (169 years unexpired) was originally sold in the immediate aftermath of the referendum result for £89m to Brockton Capital and was subsequently traded off market in November 2016 to Tai United for £103.5m.
■ The IPD average net initial yield moved out to 3.46% over the month whilst the average equivalent yield remains at 4.70%, its second month at this level (see Graph 2). Savills prime yield remains at 3.25% and is arguably under downward pressure as pricing between prime and secondary decouples.
![Graph 2](http://research.euro.savills.co.uk/_images/graph2(168).png)
GRAPH 2West End yields
Source: Savills Research, IPD
■ The Savills West End team continues to be highly active in the market having advised on over £1.1bn of deals year to date this year by volume. With 11 sales currently in the market, Q4 promises to be a busy spell.
![Table 1](http://research.euro.savills.co.uk/_images/table1(161).png)
TABLE 1Key deals in September 2017