Google’s commitment to London brings record January turnover
January is a typically muted month in terms of transaction volumes due to pre-Christmas closing, the extended holidays and a focus on business planning for the forthcoming year. West End turnover posted an unprecedented £1.56bn over the course of the month, heralding it the most active January on record. Whilst the number of deals, of eleven, is in line with the ten-year average, the transaction volume marked a nearly threefold increase of the average over the past decade (standing at £552m), of which, approximately half is attributed to only one transaction.
The transaction in question was Google’s freehold acquisition of Central St Giles, WC2, from a 50:50 joint venture held between Legal & General and Mitsubishi Estate, a partnership which developed and owned the site for over a decade. Pricing was in the order of £773m, reflecting a 3.91% net initial yield and a capital value psf of £1,810. The deal is one of the largest ever trades within the West End and importantly highlights Google’s renewed confidence in the office as a place for in-person collaboration. The development comprises approximately 408,000 sq ft of offices, where Google is already the major tenant, with NBC Universal occupying the remainder. The property comprises 25,000 sq ft of multi-let retail accommodation and also residential units.
At an initial glance, it would be easy to categorise January’s investment performance as an anomaly due to Central St Giles; however, the trade was one of four transactions in excess of £100m over the course of the month, breaking another January record.
In the second largest trade of the month, the freehold interest in Victoria House, 37 Southampton Row, WC1, was acquired off-market by Oxford Properties from LabTech Investments for approximately £420m and £1,404 psf. The 300,000 sq ft office property, which was acquired in April 2018 by LabTech for around £350m, is set for redevelopment and conversion to a Life Sciences campus, with 70,000 sq ft to be leased back to LabTech and operated by LABS, its flexible workplace provider.
Other notable transactions included M&G’s acquisition of Ryder Court, SW1, from Vanke (£132m and £1,737 psf), representing another acquisition for the UK fund following their successful recycling of Saffron House in 2021. WELPUT also sold the long leasehold interest in 20 St James’s Street to Ekistics at the quoting price of £118m, 4.19% and £2,098 psf. The acquisition marked the Greek investor’s first West End purchase and continues the theme we witnessed last year of strong investor demand for securely let assets or buildings in core locations.
Savills was involved in two transactions over the month, the first being the disposal of O&H Properties’ leasehold interest in 25–28 Old Burlington Street, W1, ahead of the guide price of £45m. The second was the acquisition of Egmont House, 25–31 Tavistock Place, WC1, on behalf of The Methodist Church, which is set to undergo a comprehensive refurbishment and will serve as the Church’s new headquarters (£14.6m and £1,014 psf).
Already, as we enter February, Savills is tracking £1.62bn of assets under offer
Emma Mason, Research Analyst, Commercial Research
However one interprets Google’s purchase, it clearly portrays commitment to London (despite the UK’s independence of the EU) and the importance of the office as a physical working environment. It will be interesting to see how much of a positive effect on buyer sentiment this will have going forward. Already, as we enter February, Savills is tracking £1.62bn of assets under offer, half of which is attributed to British Land’s agreed joint venture of Paddington Central.
Savills prime West End yield stands at 3.25%, while the MSCI net initial and equivalent yields stand at 2.79% and 4.39%, respectively.