Investment volumes and availability remain subdued
West End volumes totalled £131m in February spread across eight transactions. This figure represents around a third of the average volumes witnessed over the last decade during this period, but does show an increase in the number of transactions compared with January. This brought cumulative annual turnover to just under £300m across twelve transactions, a 60% and 67% decrease on the five- and ten-year averages respectively, and the lowest YTD we have seen since 2010.
Whilst we have witnessed a slow start to Q1 in volume, the West End is just 12% down on the five-year average in terms of number of transactions, at least demonstrating some liquidity in repriced smaller sizes. The average lot size year to date is £16.4m, in stark contrast with the five- and ten-year averages of circa £62m.
The largest transaction in February was Columbia Threadneedle’s disposal in The Colonnades Estate, Porchester Road, W2. The majority of the estate (72% of the income) comprises a 45,000 sq ft supermarket let to Waitrose for a further circa twelve years. There are also five retail, restaurant and leisure units and a vacant pub. Having previously been marketed in 2021, the asset was purchased by a private investor for £33.5m, reflecting 6.68% and £272 per sq ft.
Another key transaction was Oval’s acquisition of the 118-year-long leasehold interest in 33 Grosvenor Street, W1, following abortive conversations with a previous buyer. Designed by Squire & Partners and developed by Grosvenor in 2016, the property comprises 11,669 sq ft of office accommodation let to Floreat House Limited for a further eight years at a gross rent of £1,150,000 per annum, reflecting £98.55 per sq ft. The purchase price paid was £20m, reflecting 4.87% and £1,714 per sq ft, nearly a 40% discount from when Floreat purchased the building in 2016.
In another Mayfair transaction, Savills advised the vendor, a private investor, on their disposal of 33 Sackville Street, W1. Located on the eastern side of Mayfair, this Grade II listed Georgian townhouse comprises 3,820 sq ft NIA and was offered with full vacant possession. The property was purchased by a Swiss owner-occupier in excess of the asking price at £7.75m, reflecting £2,363 per sq ft. There is the opportunity for value enhancement through potential massing and asset management of the existing space, subject to the necessary consents.
We have seen twelve newly marketed assets in February, a 50% increase compared with January; however, still down on the long-term average. All newly marketed opportunities are below £50m, with the largest being AFIAA’s interest in Schomberg House, 80–82 Pall Mall, SW1. Held by way of long leasehold interest from The Crown Estate, the property comprises 37,279 sq ft of comprehensively refurbished office accommodation single let to Permira Advisers (London) Ltd on a lease expiring in October 2034 at a gross passing rent of £3m per annum, reflecting £80.47 per sq ft. Other assets include LBS/BauMont’s freehold interest in 95 New Cavendish Street, W1 (Q £24m, £1,161 per sq ft) and British Land’s freehold interest in 17–19 Bedford Street, WC2 (Q £23.3m, reflecting 5.25% on the commercial and £3,100 per sq ft on the residential accommodation).
Savills West End prime yield remains at 4.0%, the Bank of England base rate remains at 5.25%, and the SONIA five-year swap rate remains stable at 3.94%.