Trophy asset sales inflate London CRE deal volumes

The £1.15bn and £1.28bn sales of the Cheesegrater and Walkie Talkie boosted an otherwise steady central London investment market. 

Investment volumes in central London jumped by almost a quarter during the first seven months of 2017, according to property services firm Savills.

Around £11.5 billion ($14.8 billion; €12.5 billion) of deals had been completed for properties in central London by the end of July, compared with approximately £9.2 billion by the end of the same month last year. 

However, stripping out the £1 billion-plus deals, of which there were two this year and none in 2016, reveals that the central London market is more stable than it appears.

This year’s figures have been bolstered by the two largest ever deals for property in the City of London, both to Hong Kong-based firms. In March, CC Land Holdings acquired The Leadenhall Building, otherwise known as the ‘Cheesegrater’, for £1.15 billion, while last month 20 Fenchurch Street, or the ‘Walkie Talkie’ building, was sold to Lee Kum Kee for £1.28 billion.

If both of these mega-deals are removed from 2017’s figures, an investment volume total of just over £9 billion remains. The largest known deals in central London last year – for City Point, King’s Cross Estate and 324-348 Oxford Street – were all around the £500 million mark, which had been the traditional ballpark figure for central London and City offices until this year.

Savills said Asian investors had accounted for 63 percent of total City of London turnover in the year to the end of July, followed by European investors (17 percent) and UK investors (11 percent). In the West End market, Asian investors accounted for around 50 percent of turnover to the end of July, with UK institutions accounting for just 2 percent.

“Although the restrictions announced earlier in August by the Chinese government will reduce real estate investment from mainland Chinese property developers and institutions, investors from Hong Kong, who have been particularly busy in the market in the past year, are likely to continue to be active. However, we have noticed their buying criteria has become increasingly selective,” said Stephen Down, head of Savills’ central London investment team.

Down added that he expected strong turnover in central London in the second half of 2017 because of the amount of stock coming on to the market.