£900m of deals agreed in November
November witnessed ten deals totalling £496m, accounting for 19% of total volume this year, bringing the cumulative annual total to £2.83bn across 71 transactions.
Just under a third of the total volume this year to date can be attributed to the (only) five transactions over £100m. Of these five trades, two have been retail-led transactions on Old Bond Street, with the remaining three all value-added opportunities. We have not seen any trades of scale (>£100m) so far in 2023 for office-led income-producing opportunities. By comparison with 2022, we recorded eleven trades >£100m at this point in the year, of which six comprised office-led income-producing assets.
Approximately £900m of new deals were agreed in the month, bringing the total sum under offer to £1.24bn. Even if this total sum completes by the year end, 2023 will still be the lowest transactional activity since 2009 (which saw £3.05bn) and 55% below the peak in 2014 (which saw £9.05bn).
The largest monthly trade was Federated Hermes and CPPIB’s disposal of Haymarket House, SW1, advised by Savills. The building comprises a freehold 0.51-acre site, including 85,203 sq ft of vacant offices to be converted to hotel accommodation, and leisure accommodation on the lower floors providing nine years’ income secured against three tenants.
Other notable value-add trades include the disposal of 8-10 Great George Street, SW1, by FHPUT; a freehold office in Westminster with consent for a 134-bed hotel scheme and a 21-unit residential scheme. Pricing reflected £57.5m / £1,055 psf. This reflects a 36% discount to the original guide price in Q1 2022.
M&G has sold a 50% stake in the Fitzrovia, 247 Tottenham Court Road, W1, to Lothbury and Nomura, following a competitive bidding process. The price, we understand, is based on an estimated GDV of £191m / £2,484 psf on the consented scheme. Once complete, the scheme will comprise 59,471 sq ft of best-in-class office accommodation, with retail accommodation at ground and lower ground, and eight residential units.
In a continuation of a theme analysed in previous updates, well-located liquid freeholds remain sought after, achieving strong competition from private investors. 12 Conduit Street, W1 and 33 Golden Square, W1 have both been acquired by private Spanish investors.
Two-thirds of the deals under offer are being sold by UK vendors, as they continue to dominate as net sellers in 2023 (75% by deal number), with 42% representing institutional funds, many of whom continue to face redemption pressures.
We are tracking 77 openly marketed opportunities as we enter December, totalling £3.62bn by guide price. This is skewed towards smaller opportunities, with 64% by number (across 49 opportunities) guiding a price below £25m.
Savills prime West End yield remains at 4.0%; the Bank of England base rate remains at 5.25%, and the SONIA five-year swap rate has fallen considerably, sitting below 4% for the first time since April 2023, at 3.41%.