September witnessed another slow month for West End transactions recording only five totalling approximately £310m. This continues a clear trend across the entire year. Activity in Q3 has been much the same as the previous two, as volumes hover around the mid-£900m mark, with just 20 transactions per quarter. Turnover to the end of Q3 2019 now stands at £2.8bn across 60 transactions. This represents falls on the five- and 10-year average turnover across the same period of 50% and 42%, respectively.

In the largest transaction this month and the fourth largest of this year, Transport for London (TfL) has sold the 150-year leasehold interest in 55 Broadway. The property is a Grade I Listed office and retail asset totalling 184,621 sq ft NIA which has served as TfL’s headquarters of London Underground since 1929. It also held a planning consent for conversion to 112 apartments, offices and retail. Following a competitive sales process which began in May with a quoting price of £110m, the property was acquired by Integrity International Group for £122.50m which reflects a capital value of £664 per sq ft. We understand a hotel scheme with UK partner, Trilogy, is planned. The depth of the market for the asset and the strength of pricing achieved is evidence of the continued demand for value-add product in central London in particular from hotel operators who continue to be competitive, in this instance in spite of planning consent.

In another hotelier trade, September witnessed the sale of 55 Newman Street. The property provides 31,292 sq ft NIA of office accommodation available with vacant possession and holds a June 2018 planning consent for a new build hotel scheme totalling 65,574 sq ft GIA. The property was sold by South African hotelier, Leeu Collection, who acquired the site in 2017 for £78m and has exchanged to a Private European investor for a price in the region of £70m, reflecting £2,237 per sq ft.

Kings House, 174 Hammersmith Road has been sold by Kier Property and Investec following an extensive period under offer. The freehold office totalling 58,096 sq ft was newly developed in 2017 and is multi-let however the majority of the income is attributed to co-working operator, Work.Life. The property was acquired by private clients of Catalyst Capital for £50m, reflecting a net initial yield of circa 6.0% and a capital value of £861 per sq ft.

Other material transactions in September remain confidential for now.

We are tracking approximately £1.2bn under offer, down from a peak of £2bn as negotiations on a number of high value transactions including 21 St James’s Square and Shell Centre have broken down. It appears that despite a willingness of buyers to agree to pay market levels there has been a shift in the minds of vendors and an apparent reluctance to sell even once terms have been agreed. Some certainly believe future conditions may yield better prices than the present given the occupational outlook in the office sector, low interest rates and current shallow buyer pool albeit this is moot.

September normally signals the start of the investment market’s typically busiest period of the year and we have recorded seven new opportunities over £100m. Nearly all are ‘grey’ sales, the approach recognising the challenges in uncertain political times.

The MSCI average net initial and equivalent yields remain broadly unchanged at 3.82% and 4.81%, respectively. Savills prime yield remains at 3.75%.