Q1 2017 was the most active first quarter of the year ever for London real estate investment, according to global real estate advisor, CBRE.
A total of £4.9bn was transacted over the course of the quarter, the highest quarterly total since Q4 2014. This follows a strong performance at the end of 2016, which saw £4.1bn transacted in Q4, providing further evidence of the resilience of the London office investment market following the EU referendum. A total of 13 deals of £100m or larger transacted in Q1 2017 compared with 11 in Q4 2016.
Overseas investors once again dominated the market; accounting for 80% of all transactions by volume in Q1 2017, up from 74% in the previous quarter. In a continued vote of confidence in the London market, appetite from overseas investors for large lot sizes remains undiminished. Nine of the 13 transactions amounting to £100m or more were purchased by overseas parties.
This total includes The Leadenhall Building, 122 Leadenhall Street, which was purchased by Hong Kong-based CC Land for £1.15bn, representing one of the largest investment transactions in UK history. Boosted by the Leadenhall Building deal, Asian investors represented the largest share of overall investment transactions at 50%, followed by European investors at 23%.
After moving out by 25bps to 4.25% in Q2 2016, prime City yields reverted to their pre-referendum level of 4.0% as a result of strong investor demand whilst prime West End yields remained at 3.75% in Q1 2017.
“The momentum we experienced at the end of last year has shown no sign of abating in the early months of 2017 and London remains a central focus for international capital requirements. This is a great endorsement of London’s continued appeal and testament to its resilience and ability to adapt and diversify. Appetite from overseas investors for large lot sizes, particularly in the City, will be a key feature of the market for the remainder of the year.” said Stephen Pearson, Head of City Investment Properties.