Off-market transactions dominate activity and flight to quality intensifies
Transactions continued apace in November, with £402m trading across 10 deals, the majority of which fall into the core category. This is marginally above the long-term average turnover level for November and brings investment volume to date to £4.3bn, some 27% below the five-year average but 65% ahead of last year’s equivalent figure of £3.6bn.
In the continuation of a theme that we have seen throughout the year, a large proportion of November’s transactions (90% by volume) took place off-market, the largest of which was Cain International’s disposal of its long leasehold interest in 17–22 South Audley Street, W1, for £100m / £2,083 psf.
The freehold interest in 50 St James’s Street, SW1, which comprises 25,424 sq ft (NIA) / 49,657 sq ft (GIA) of vacant commercial accommodation, currently in sui generis use, has been acquired by an undisclosed investor for a price understood to be just under £100m. At close to £3,900 psf, the transaction reinforces the flight-to-quality theme, which continues to strengthen across the West End and highlights, in particular, the trophy status of freehold assets in St James’s.
In another off-market transaction, Lazari has acquired the freehold interest in 13 Hanover Square, W1, for £70m, which reflects a capital value of £2,016 psf and a net initial yield of 3.00% based on the passing rent of £2,242,785 p.a. (£69 psf on the let accommodation). The property is majority let (66% by income) to service office provider, Halkin Management Company Ltd, until 2028 and also includes a retail unit let to Pret a Manger until 2031.
Savills has acted on behalf of two overseas investors in two off-market transactions; namely the freehold interests in 283 Oxford Street, W1, and 17–18 Dover Street, W1, which have exchanged for £43.3m (3.61% / £3,355 psf) and £40m (3.18%/£3,167 psf), respectively. The former is majority let to Footlocker (85% by income) until 2028 and was acquired from M&G, while the latter is single let on an RPI-linked lease to luxury wellness clinic, Lanserhof at The Arts Club, until 2033 with a reversionary lease in place to 2043 thereafter.
Additional transactions include SE Land & Estates’ acquisition of the freehold interest in 80–84 Brewer Street & 10–11 Lower John Street, W1 (£17m / 3.31% / £1,700 psf); a private Russian investor’s disposal of the freehold interest in 169 Fulham Road, SW3 (£12.1m / 3.41% / £1,722 psf); and National Educational Union’s disposal of the freehold interest in 7 Northumberland Street, WC2 (£9.5m / £799 psf).
Finally, Savills has also acted in the disposal of 36 Linhope Street, NW1 (£5.60m / £924 psf) and the acquisition of 96–98 Baker Street, W1 (£4.95m / 5.05% / £784 psf) on behalf of London Business School and a private Israeli investor, respectively.
As we move into December, we are tracking a record £4.5bn under offer in the West End, with key transactions to watch including British Land’s disposal of a 75% stake in Paddington Central, W2; Almacantar’s disposal of the long leasehold interest in 5 Marble Arch Place, W2; Landsec’s disposal of 40 Strand, WC2; and Grosvenor’s disposal of a 50% share in 76 Buckingham Palace Road, SW1.
Based on November’s activity, Savills prime West End yield remains at 3.25%, while the MSCI net initial and equivalent yields stand at 3.04% and 4.51%, respectively.