Biggest deal in two years as market momentum builds
April showed further signs of market recovery, with a healthy transaction volume amounting to £485.9m of turnover across four deals. This brings the year-to-date volume to £1.35bn across 20 deals, reflecting an average lot size of £67.3m. Compared to the five-year average, these figures still reflect a 28% fall in terms of volume and a 31% decrease by number of deals; however, it is interesting to note that the transaction volume is nearly three times higher than at this point last year (£476m) and that the average lot size is the highest it has been since interest rates began to rise in Q1 2022.
The improved volume and average lot size is largely a result of the gradual re-emergence of deals in excess of £100m, with April witnessing the fourth deal of this scale, which already equals the same number seen throughout the whole of 2024. Savills data indicates that c.70% of annual turnover is driven by the £100m lot size range, and with further interest rate cuts being widely anticipated, the City market’s recovery continues to gather momentum, albeit gradually. At the end of April, Savills is currently tracking a further £1.01bn under offer across 28 deals and c.£1.97bn of available stock.
In the largest deal of April, and indeed the largest deal in the City market since March 2023, State Street acquired the virtual freehold interest in 100 New Bridge Street for a headline price of £382m, reflecting a capital value of £1,964 per sq ft (£333m after the deduction of a notional rent free top-up). Held on a 999-year-long leasehold at a peppercorn rent and located on the east side of New Bridge Street, five minutes to the west of St Paul’s Cathedral and three minutes to the north of Blackfriars station, the property comprises a brand new 194,517 sq ft office development by Helical & Orion Capital Managers which is due for completion in Q1 2026. State Street acquired the property for its own occupation and is the latest tenant set to relocate to the City from Canary Wharf, following HSBC’s high-profile decision to return to the Square Mile. The major purchase also highlights an extreme example of the current trend of owner-occupiers opting to purchase their own property as opposed to taking a long-term lease.
In another major deal, Addington Capital and SVP acquired the long leasehold interest in Senator House, 85 Queen Victoria Street, EC4. Located on the south side of Queen Victoria Street, approximately 250 metres to the south of St Paul’s station and held long leasehold with 132 years unexpired term at a head rent of 9.00% of rents receivable, the property comprises 150,802 sq ft of office and ancillary accommodation arranged over atrium base, ground and seven upper floors. The property is principally let to Quilter on a lease expiring in September 2034, with the majority of the lower floors being vacant. After a long sales campaign which began in October 2021, L&G sold the long leasehold to Addington Capital and SVP for a sum of £63.5m, reflecting an 11.95% net initial yield and a capital value of £421 per sq ft.
The sustained flow of new opportunities over the previous quarter means that there is now a healthy £1.97bn of available stock in the market across 60 deals
Ed Robinson, City Office Analyst, Commercial Research
In another key deal, Savills acted on behalf of La Salle IM on the disposal of 29 Clements Lane, EC4, exchanging the freehold interest for a sum in excess of the guide price of £30m and £497 per sq ft. Located on the east side of Clements Lane, approximately 250 metres to the east of Bank station, the property comprises a 60,368 sq ft freehold building, with vacant possession available from September 2025. The property was acquired on an unconditional basis with a strategy for hotel conversion, continuing a familiar trend seen in the vicinity with the disposals of St Clements House and 68 Lombard Street.
In the wider macroeconomic context, the Bank of England’s Monetary Policy Committee (MPC) voted to reduce the base rate to 4.25%, which was another step forward. April only saw £191m of new on-market stock being launched to the market across seven deals; however, the sustained flow of new opportunities over the previous quarter means that there is now a healthy £1.97bn of available stock in the market across 60 deals. With transaction volumes beginning to increase and interest rates falling, vendors have cause to feel more optimistic about generating competitive tension as long as pricing expectations remain sensible.
Savills’ City prime yield is 5.25%, while the West End prime yield is 3.75%.