West End Investment Watch – August 2017

■ In the largest deal of the month, the Crown Estate has sold a new 125 leasehold interest in Golden Cross House, 450-460 Strand to Motcomb, for £68.25m, reflecting a 4.15% net initial yield and a capital value of £1,026 per sq ft. The office accommodation is single let to MWB Business Exchange Centres at a passing rent of £40.22 per sq ft, subject to fixed uplifts of 2.5% per annum. The retail comprises seven units leased o rents reflecting between £185–£250 per sq ft Zone A. The property has a WAULT of over 11 years to lease expiry.

■ In an off market transaction, TRIUVA sold Elms House, 43 Brook Green to Neo Capital for £67.5m, reflecting a 4.15% net initial yield and a capital value of £788 per sq ft. The property is an 85,672 sq ft office single let to Halcrow Group until December 2030 with a tenant only break option in 2025. The passing rent reflects £33.27 per sq ft with the next open market rent review in September 2018.

■ UK institutions remain significant net sellers this year, making up over a quarter of all sales, but just 2% of acquisitions by turnover (see Graph 1). This has been a continuing trend over the last three years with the total net disinvestment from this category of investor totalling £4.45bn since 2015 (see Graph 2). As has been well publicised, overseas investors continue to be attracted to the Capital, making up almost 75% of turnover with Asian investment contributing approximately 50%.

^{Source: Savills Research}

^{Source: Savills Research}

■ Savills was involved in 20% of July turnover and with a number of transactions due to exchange shortly and a strong sales book due for the Autumn, the team remain extremely active.

■ The IPD average net initial yield moved out 7bps to 3.41% over the month whilst the average equivalent yield moved only 1bps to 4.71%. Savills prime yield stands at 3.25%, albeit there is downward pressure on this.

^{Source: Savills Research, IPD}