Investment in the central London commercial property market could reach record-breaking levels this year, after first half volumes hit £9.4 billion.
This figure has only been exceeded on two previous occasions, in 2004 and 2007, and easily surpasses last year’s H1 total of £6.1 billion, in what went on to be a record-breaking year.
According to DTZ, the number of commercial property transactions worth over £100 million is also on the rise, with 24 £100 million plus sales taking place in the first six months of 2015, compared with 18 in the same period last year and 15 in 2013.
This year’s bumper investments include Cathay Life Insurance’s £575 million acquisition of the Wallbrook Building – the single biggest deal of the year so far – and the £349 million purchase of the Madame Tussauds building by fellow Taiwanese investor Fubon Life.
Overall, international buyers remained extremely active in the first half of the year, accounting for £6.2 billion of the total investment volume. Investors from Asia Pacific were responsible for a third of this figure (£2.2 billion) followed by European investors (excluding the UK) who contributed £1.5 billion, and North American investors who pumped £1 billion into the market.
DTZ expects the investment market to continue to gather pace during the third quarter, with a number of significant assets on the market. These include Broadgate Quarter, which is being sold by HSBC and Hines, and the Blue Fin Building on the South Bank where Time Inc is undertaking a sale and leaseback.
Martin Lay, Head of Central London Investment, said: “For those seeking prime assets above £200 million, there remain relatively few markets in Europe that offer the size and liquidity of central London.
“The sheer weight of money seeking an investment home, coupled with the large lots available in central London, suggest investment volumes will remain high in the third quarter of 2015.”
Senior Research Analyst, Sophy Moffat, added: “Real estate yields remain attractive compared to bond yields at historical lows, and real estate is increasingly prized among international investors for its ability to pay a stable and attractive income.
“One factor in play is that central London still offers good prospects for investors seeking income growth: lack of supply in the capital is pushing prime rents to record-breaking levels, with double-digit growth forecast for the majority of central London submarkets this year.”
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