West End Investment Watch

Market comment and notable deals

• September 2018 saw volumes of £1.02bn over 14 transactions bringing Q3 volumes to £2.32bn over 35 transactions. This represented the largest Q3 since 2014 (see Graph 1) and brings volumes to the end of September to £5.64bn, 5% in excess on this point last year.

• On behalf of Deka Immobilien GmbH, Savills acquired Verde, 10 Bressenden Place for a confidential price. The newly developed property comprises 319,534 sq ft of office, retail, gym and ancillary accommodation arranged over lower ground, ground and 10 upper floors. The property is multi-let to 18 tenants with a WAULT of over 12 years at a passing rent reflecting £68.91 per sq ft overall.

• Off market, Workspace acquired The Shepherds Building in Shepherds Bush for £125.3m, reflecting a 4.80% net initial yield and a capital value of £835 per sq ft. The freehold office property consists of 150,060 sq ft of office accommodation, currently let to 32 tenants, at a passing rent of £45.60 per sq ft overall with an average unexpired lease term of six years. Tenants include TV producer, Endemol Shine, hotel bookings platform, Mr & Mrs Smith and Noble Foods.

• In another off-market deal and on behalf of a private Hong Kong Investor, Savills acquired 151 Wardour Street for £49m, reflecting a 4.10% net initial yield and a capital value of £1,872 per sq ft. Having purchased the property in 2017, the vendor, Thor Equities, comprehensively refurbished the upper office parts and agreed a new 20-year lease to The Office Group at an average rent of £67.50 per sq ft. In conjunction, planning permission was also sought for implementation of a restaurant into one of the three retail units which was subsequently let to Lebanese restaurant Maison du Mezze on a new 20-year lease.

• The MSCI average net initial yield moved out to 3.64%, whilst the equivalent yield moved out just one basis point to 4.68% (see Graph 2).

• The Savills West End team continues to be highly active in the market having advised on over £1.5bn of deals this year to date by volume. With eight sales currently in the market, Q4 promises to be a busy spell.