West End Investment Watch

Second highest August on record as West End confidence continues to build

As forecast last month, the West End’s ever-increasing momentum showed no sign of slowing during the traditionally quieter month of August, with turnover reaching £821m across 13 transactions.

This is the second highest August figure on record and 96% higher than the previous five years average, while in a broader context, annual turnover to date now stands at £2.92bn, some 76% ahead of last year’s lockdown-affected figure and 5% ahead of 2019’s figure.

The largest transaction to take place was Oxford Property & Richemont’s disposal of 47-50 New Bond Street, W1, to a Private Middle Eastern investor for £227m / 3.29% / £4,633 psf. The mixed-use property is multi-let for a weighted unexpired term of 7.8 years, with 60% of the income secured against the two retail tenants, Mulberry and Delvaux, until 2035 and 2027, respectively.

Other key activity included Lazari’s off-market disposal of its freehold interests in 250 Euston Road, NW1, and 171-174 Tottenham Court Road, W1, to Derwent London for £189.9m / 2.32% / £1,145 psf and £24.7m / 2.6% / £1,524 psf, respectively.

The former is single let to University College London Hospital until 2039, subject to tenant break options every five years from 2024 onwards, while the latter, which lies opposite Derwent’s Network Building, is multi-let at an annual rent of £0.6m.

In an endorsement of Savills current prime West End yield, BMO Global has sold its freehold interest in Cassini House, 57 St James’s Street, SW1, to Kerry Properties, following a competitive open market campaign, for £145.5m / 3.20% / £2,834 psf.

The property, which has been recently refurbished, is multi-let to three tenants for a weighted unexpired term certain of 8.25 years at an average rent of £101 psf.

Another prime transaction to take place was CC Land’s off-market disposal of its freehold interest in 1 Chapel Place, W1, to Chinese investor, Paul Suen Cho Hung, for £63.7m / 3.54% / £1,956 psf. The property is multi-let to two retailers and four office tenants at an average rent of £74 psf.

During August, sales also included The Scout Association’s disposal of Baden Powell House, its long-standing headquarters building on Queen’s Gate, SW7, for c.£45m; Orchard Street’s disposal of 1–5 Poland Street, W1, to Aquarelle for c.£43m / 4.14% / £1,592 psf; Thai Square’s disposal of 17–19 Cockspur Street, SW1, to a Private Danish investor for c.£23m / 3.98% / £1,567 psf; and a Private UK investor’s disposal of the virtual freehold (955 years unexpired) interest in 8–26 Holbein Place / 76–92 Pimlico Road, SW1, a multi-let retail parade comprising 19 units.

With approximately £3.5bn of assets under offer and several major sales set to launch imminently, we anticipate a particularly active Q4 as travel restrictions continue to ease and confidence returns to the occupational market.

On the basis of evidence seen this month and general market sentiment, Savills prime West End yield remains under downward pressure at 3.25%. The MSCI net initial and equivalent yields stand at 3.52% and 4.81%, respectively.