Over the last quarter there has been a definite turnaround about how investors perceive future performance of direct property investment with the West End benefiting from this.
Rents have soared over the last five years and have overtaken the level last reached in the salad days of 1990, with £861 per m2 a year having just been achieved on a floor at Burford’s 14,492m2 Mayfair Place development. There have also been a number of reported lettings above £753 per m2 a year.
Peter Trinder, director of central London investment at Nelson Bakewell, believes that investors, wary of the experience of the early 1990s, are struggling to come to terms with these high rents: “Many investors are taking a cautionary approach and downgrading rental growth forecasts, and are now generally looking to hold and work their investments rather than buying into new propositions. The main focus for those UK funds wishing to acquire is for multi-let workable stock, particularly in off-core locations.”
With total availability now running at less than 3% in the West End and with little new space on the immediate horizon, competition for the available space will push up rents in core West End locations.
As a result, there have been a number of large acquisitions away from the main W1 core areas, highlighting investors’ worries over future growth in the core.
Trinder says that two other factors are encouraging uncertainty in the investor base and will shape the investment market during the third quarter of 2000: “The pound remaining strong despite recent falls is causing overseas investors to hold back on further investment.”
Some of the larger German banks and institutions are beginning to sell some assets and taking profits. Also a potential rise in interest rates on the horizon has made a number of the UK lending banks nervous and more hesitant to lend on speculative stock.”
Selection of West End deals
|
Property |
Price £m |
Buyer |
Seller |
|
Victoria Plaza |
112 |
HRO/CGI |
Salomon Smith Barney |
|
Paddington Goods Yard |
84.1 |
Development Securities/Equitable Life/Norwich Union |
Grainhurst Yard |
|
Monsanto House, Victoria Street |
33.56 |
Scottish Widows |
WestInvest |
|
NCR House, Marylebone Road |
41.75 |
National Bank of Abu Dhabi |
NCR |
|
Cleveland House, St James’s Square |
80 |
City & West End Developments |
Harwood |
