The continuing weight of money chasing increasingly limited stock has led to West End yields hitting record lows.
This year has picked up where 2004 left off, with yields for prime investments in the capital declining further to below 4%.
A Mayfair office building was this week sold at a yield of just 3.75%. Strategic Real Estate Advisors sold the 14,000 sq ft office building at 14 Curzon Street, W1, to Allied Domecq Pension Fund for £15m.
The building was let to Chime Communications in 1999 – shortly before rents started to rise rapidly – for 20 years.
However, the initial yield will revert to 4.5-4.75% when a rent review comes into force shortly.
Michael Elliott advised Stratreal and DTZ advised Allied Domecq Pension Fund.
Michael Elliott director Mark Shipman said: “We’re seeing more investors than ever before coming through our doors and they will not be putting money back into equities. If interest rates remain low, or fall further, there will be even more money coming into property.”
Michael Elliott has also sold a prime retail building in the West End at sub-4%, the steamiest level witnessed since jeweller Tiffany & Co bought the freehold of its Bond Street building in October 2002.
Private Irish investors advised by Knight Frank paid David Coffer’s and Anthony Lyons’ St James Capital £30.6m for 27-29 Long Acre, WC2, let to Hennes & Mauritz. The property is rack rented and the net initial yield is just 3.6%.
High prices are not reserved for dry, large prime buildings with blue-chip single occupiers.
The multilet former Rolls-Royce showroom in Mayfair, 14/15 Conduit Street, W1, has been sold by Betanic Property BV to Kent County Council Superannuation Fund for £12.2m, a 4.9% yield.
And last week, the multilet Stratton House, W1, was sold at an initial net yield of 4.8%.
Neither is the trend limited to central London. According to CBRE, the average prime yield fell 80 basis points to 6.3% during 2004, its lowest since the second quarter of 1985.
References: EGi News 24/01/05
