West End transactions slide

West End investment deals have halved in volume and number since their 2014 peak, according to new data from Savills. In stark contrast to the highly active City of London investment market, which is on track for a record year in 2017, the West End market is becoming more and more stagnant. So far this year, 101 office buildings have changed hands; the figure for the whole of 2014 was 244. And it is at the smaller, usually more active, end of the market that the stasis is most evident. Indeed, according to Savills, the lack of transactions is particularly acute in the market for properties priced at less than £20m. From 2013-14 to 2015-16 the number of deals below that level halved, and this year there have been 48 transactions so far at that level – versus a peak of 150 in 2014. Paul Cockburn, head of West End investment at Savills, said that the current volumes, already on a downward trajectory anyway, were being skewed by larger deals. Great Portland Estates’ £435m sale of Rathbone Square and Derwent London’s £165m sale of the Copywright Building this year were landmark one-off deals in which developers sold fully-leased new developments with big price tags. As net ownership moves away from these conventional UK institutions and REITs, which would ordinarily recycle capital and trade property, transaction numbers and volumes have both reduced. Many developers have also emptied their development pipeline and are subsequently not releasing new stock into the market. Some West End offices have also been taken out of the market permanently owing to residential conversions. Andrew Thomas, head of international capital at Colliers International, said that the agency world thrived on “turnover and needs that for success”. He added that “sheer geography” limited supply of investment availability. However, other related markets such as Paddington, the South Bank, and King’s Cross, have become more liquid as the centre of focus has moved outwards. The overall liquidity of Central London offices is not going down. According to EG’s LOMA survey, published two weeks ago, the total is the largest invested in a third quarter for more than three years, and up by 30% on the five-year Q3 average. Investment transactions continued to be driven by foreign investor activity, with all of the top 10 sales of the quarter to overseas investors. Assets currently being offered in the West End include: ■ 125 Shaftesbury Avenue, WC2 The Almacantar-owned block, which is fully let to WeWork, has been up for sale through CBRE since July but has so far failed to find a buyer. The guide price at the time was £275m, and the yield is thought to be around 4.25%. ■ Verde, SW1 This Victoria block is being redeveloped by Tishman Speyer and PSP Investments. GM Real Estate and Eastdil Secured are advising on the future of the 317,083 sq ft building known previously as Eland House. The price tag is expected to be £500m, a yield of around 4.25%. ■ Regent Quarter, N1 The Abu Dhabi Investment Authority, which is advised by LaSalle Investment Management, has appointed Cushman & Wakefield and CBRE to market its 250,000 sq ft Regent Quarter development, N1. The guide price is £270m. The building went to best bids last week. ■ 28 St George Street, W1 A private UK investor has instructed Savills to sell the office block for a net initial yield of 2.5%, or £70m. The 19,000 sq ft building is single let to private equity firm Providence Equity until January 2022, producing an income of £1.83m, or £80 per sq ft. ■ 255 Hammersmith Road, W6 Standard Life Investments brought to the market in July L’Oreal’s 110,106 sq ft UK headquarters in the centre of Hammersmith, west London, for £57.4m, a net initial yield of 7.25%. The building is close to going under offer. ■ 30 Broadwick Street, W1 Great Portland Estates is planning to sell its fully leased redevelopment of 30 Broadwick Street, W1, for around £190m, a 4% yield. The REIT has instructed agents at Colliers and CBRE to offload the 94,000 sq ft block, which is let to tenants including Exponent Private Equity and Ivy Soho Brasserie. Rents exceed £100 per sq ft. To send feedback, e-mail nick.johnstone@egi.co.uk or tweet @n_johnstone or @estatesgazette