Q2 saw £1.3bn of investment transactions in the South East, second only to Q4 2013, according to research from Knight Frank.
The figure represents a 135% increase on the previous quarter, and 154% above the 10-year average.
The quarter was characterised by a number of particularly large lot sizes, with the largest four transactions totalling £586m, or 45% of turnover, with investors focussing on larger, deliverable lot sizes in core markets.
Major transactions included M&G’s acquisition of Bedfont Lakes for £167m, and L&G’s acquisitions of Apex Plaza in Reading (pictured) for around £90m, and the Compass Portfolio for £135m.
UK institutions continued to account for most acquisitions, but increasing levels of US equity is looking to buy into ‘value add’ opportunities, with rental growth being factored in to most acquisitions.
The substantial weight of money seeking South East office stock continues to put pricing under pressure. Yields for prime 15-year income stand at 5%, while strong interest in prime five-year income has seen yields harden to 5.5% NIY.
Tim Smither, partner in Knight Frank’s national offices capital markets team ,said: “After a relatively quiet first quarter, we have seen an increase in volumes being marketed in the South East, almost all of which has been very well received in the market, as the expectation of rental growth really begins to take off. We expect the market to continue to stay buoyant for the remainder of the year, as investor demand significantly outstrips supply, both at the prime and secondary ends of the market.”
