Market comment and notable deals

• Investment turnover across September saw six transactions totalling £582.15m, taking overall investment for 2018 at the end of Q3 to £8.63bn across 94 transactions. This is in line with last year’s figures of £8.67bn across 94 deals.

• At the end of Q3 2018 there are currently over £2.5bn of transactions under offer, compared with only £900m in 2017.

• There is undoubtedly continued demand from domestic and overseas investors, however, we believe year end turnover will be affected by a lack of available stock. At this stage last year total availability stood at over £6.5bn, compared to current availability of only £1.5bn, across 28 opportunities.

• Savills predict turnover for the year will reach £12bn, which will be only the fourth time in history investment volumes have reached this mark, and considerably higher than the 10-year average of £8.37bn. At this juncture we expect volumes will fall short of the record £12.64bn transacted in 2017.

• In the largest transaction of the month, Norges Bank Real Estate Management acquired the freehold interest in Sixty London, Holborn Viaduct, EC1 for £330m, reflecting a net initial yield of 3.85% and a capital value of £1,396 per sq ft. The landmark office building occupies a 0.7 acre site and provides 236,422 sq ft of Grade A office and retail accommodation. The offices are let to Amazon for over 10 years, at a rent of £54.71 per sq ft overall, which is subject to annual CPI linked increases with a minimum of 1% and maximum 4% uplift.

• Another notable transaction in September saw Singaporean investor City Developments Ltd acquire the freehold interest in Aldgate House, 33 Aldgate High Street, EC3 for £183m, reflecting a net initial yield of 4.93% and a capital value of £868 per sq ft. The property provides 211,855 sq ft of office, retail and ancillary accommodation and is multi let to four office and one retail tenant. The current passing rent of £9,247,572 per annum reflects £43.65 per sq ft. The weighted average unexpired term is 7.4 years to expiry and 5.4 years to breaks.

• In their third City acquisition of 2018, M&G Real Estate acquired Gate House, 1 St John Square, EC1 in an off market transaction for £28.5m reflecting a net initial yield of c.5% and a capital value of £1,086 per sq ft. The freehold building comprises 26,254 sq ft and is multi-let on a floor by floor basis. Originally developed in the 1960s the property benefits from planning permission for an extension of the third and fourth floors and an additional sixth floor.

• Asian investors continue to account for the largest share of investment into the City, with 57% of total volume to date, £4.96bn across 20 transactions. UK investors still lead the way in terms of number of deals, having acquired 42 buildings up to the end of Q3 2018, totalling £1.55bn (18% of total volume).

• Our prime City yield remains at 4% which compares with the West End prime yield of 3.25%.