Gresham Down Capital Partners says investment side transaction volumes of commercial property, including those still under offer across central London for 2010 were up by just under 50% to stand at £11.6 billion (approx. 13.6 billion).
The specialist central London commercial property investment consultancy itself transacted more than £620 million and has just completed the £280-million sale of the European HQ of Goldman Sachs, on behalf of Warren & Partners, to Chinese Estates.
In Gresham Down's January Snap Shot it reports that over the course of the year prime net initial yields dropped comfortably below their long term average and capital values rose substantially in line with a strengthening occupational market approaching £900 and £2,000/ft² for prime City and West End offices respectively.
Notably transaction volumes in the West End rose 115% from 2009 levels to stand at £6.03 billion for the year, as the market continued to attract an unprecedented volume of overseas high net-worth investors and sovereign wealth funds seeking wealth preservation. Overseas buyers accounted for 60% of total transactions.
Gresham Down reports that volumes for the year were boosted by a number of significant £100-million-plus transactions in a market usually noted for a higher volume of sub £50-million transactions.
Also of note was the prime retail sector's contribution to West End turnover contributing over 20% of the total number of transactions. Gresham Down says this was driven by a sharp rebound in the confidence of prime Central London retail, on the back of a weak currency, London's attraction as a tourist destination and the resilience of the economy.
City transaction volumes, at £5.63 billion for the year, increased by a more subdued 13% on 2009 levels, largely a reflection of lower liquidity levels during the second half of the year and to a lesser degree, a number of failed/withdrawn transactions, such as Blackrock and Hermes' aborted sale of Tower 42.
Gresham Down says that the City because of its larger lot sizes and more institutional audience is more price sensitive than the West End. Nevertheless the City was still a major draw to overseas investors who accounted for 55% of total transactions.
Looking forward over the course of 2011 Stephen Down, Managing Partner of Gresham Down, said: "We see the market and yields for prime property generally holding up during the course of 2011 underpinned by sustained levels of unsatisfied and new demand from overseas funds, high net worth private investors and sovereign wealth funds, but do not envisage any further yield compression from the current rates of 5.25% in the City and 4% in the West End. But increasing liquidity, scarcity of finance, perhaps a more cautious outlook on rental growth and a more neutral stance by certain investor groups is likely to result in a softening in pricing on more secondary product."
Source: MJ2 Limited
