Cushman & Wakefield : Hong Kong investors drive record Q1 volumes in London’s West End

Investment into commercial property in London’s West End reached a new record of £1.93bn in the first quarter of the year – despite market perceptions and concerns over the UK’s exit from the EU, according to Cushman & Wakefield.

The figure surpasses the West End’s previous record volume of £1.80bn, set in 2013, and exceeds the 5-year first quarter average by 22%. The figure was swelled by several large deals, including Ampersand at 111-125 Oxford Street and 180 Wardour Street in Soho, sold by Cushman & Wakefield on behalf of a private Hong Kong family to Emperor Holdings for £260m, reflecting £2,910 per sq ft and a net initial yield of 2.93%.

Other major deals included CC Land’s acquisition of One Kingdom Street for £292m and Deka’s acquisition of Great Portland Estate’s Facebook Campus at 25-50 Rathbone Square in Fitzrovia for £435m.

Across the capital, the City of London also enjoyed a strong first quarter, with total transaction volumes reaching £2.25bn, a 9% increase on the £2.07bn recorded a year ago, meaning total volumes reached £4.18bn.

Richard Womack, Head of West End Capital Markets, Cushman & Wakefield said: “The record volumes reflect the current demand for West End assets, especially among Hong Kong investors who are increasingly active in this market. They accounted for just under half the total quarterly volume, enticed by the West End’s wealth preservation characteristics as well as the currency advantage enjoyed by non-sterling investors.”

Far Eastern buyers dominated in the West End and the City, accounting for 72% of acquisition volumes in the latter. A significant proportion of this can be attributed to CC Land’s £1.15bn acquisition of The Leadenhall Building from Oxford Properties and British Land. In contrast UK investors were net-sellers over the quarter, acquiring £369.3m of stock in the City, while disposing of £1.27bn.

James Beckham, Head of London Capital Markets, Cushman & Wakefield, said: “There is no shortage of capital targeting commercial property, the challenge for investors has been accessing suitably-priced stock. Exchange rates play a significant role in that and sterling’s depreciation has benefitted investors from the Far East, especially those from Hong Kong and mainland China, who can also move quickly in this market.”

A number of large lot size sales have recently been brought to market, with current availability standing at £2.84bn in the City and its respective sub-markets. In the West End, current stock levels are low and the wealth of capital targeting is helping to maintain prime yield levels across most sub-markets.

Source: Cushman & Wakefield

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