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City Investment Watch

Total City turnover exceeds £8bn for fifth consecutive year January 2017

Savills World Research UK Commercial

Market comment and notable deals

nDecember turnover was £1.3bn across 16 deals bringing year-to-date total City turnover to £8.07bn, 25% lower than 2015's total.

nHowever, 2016 turnover was 31%up on the long-term annual average, and the fifth consecutive year where turnover has exceeded £8bn.

n 157 deals completed in 2016 with an average lot size of £51.43m. This was similar with 2015, which saw 159 deals completed. However, due to there being 34 deals over £100m in 2015 compared with just 19 in 2016, the average lot size in 2015 was significantly larger at £69.59m

n In the City market, we are currently monitoring 64 investment opportunities totalling circa £3bn. Of this, 28 are currently under-offer totalling circa £1.04bn, leaving an estimated £1.95bn worth of available opportunities.

n A notable deal from December was the purchase of CityPoint, 1 Ropemaker Street, EC2 for £561m, 4.43% NIY and£793/sq ft. The property has been bought by Brookfield from Beacon, and is currently let to tenants including Simmons & Simmons, Regus and Simpson Thacher & Bartlett LLP.

n Also in December, Madison International acquired Oxford Properties' 50% share of King Edward Court & St Martin's Court, EC4 for £200m, 4.90% NIY and £1,147/sq ft. The buildings are occupied by The London Stock Exchange and CBRE and have a WAULT of nine years.

n Savills advised Beijing Capital Development Holding Group in the purchase of 30 Crown Place, EC2 for£204m, 4.43% NIY and £1,033/sq ft. Samsung SRA were the sellers of the 197,481 sq ft office building, the London HQ of Pinsent Masons LLP.

n In 2016, Asian purchasers accounted for the highest level of turnover (44%), followed by European purchasers (15%) and UK purchasers (14%). The percentage share for US purchasers is still relatively low at 10%, while Middle Eastern purchasers have only accounted for 7% of City turnover. The remaining 10% is accounted for by purchasers from other nationalities.

n For 2016, the Institutions accounted for 52% of purchases, down from an 85% share in 2015. Property Companies increased their market share from 9% in 2015 to 32% last year. We also saw increased activity from private investors whose market share rose from 3% in 2015 to 10% last year.

n It was encouraging for the City market to see investment rise from £1.1bn in Q3 to 2.7bn for Q4. We anticipate the good level of demand to continue through into Q1 2017, as foreign investors continue to look to the Capital for secure investments, while benefiting still from the currency shift.

n Savills prime City yield has remained at 4.25% for the seventh consecutive month. The spread between the City and the West End is still 100bps with the West End prime yield currently at 3.25%.

n Although 2016 was a year full of surprises that threatened the stability of the market, the strong fundamentals coupled with the currency shift ensured another strong year of investment for the City.

GRAPH 2

Turnover by purchaser nationality

Chart source: Savills

GRAPH 1

City turnover by quarter

Graph source: Savills

GRAPH 3

Turnover by purchaser type

Chart source: Savills

City Investment Watch | UK Commercial

02

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Savills plcSavills is a leading global real estate service provider listed on the London Stock Exchange. The company established in 1855, has a rich heritage with unrivalled growth. It is a company that leads rather than follows, and now has over 700 offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

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Stephen HartleyAssociate+44 (0)20 7409 8955shartley@savills.com

Felix RabeneckDirector+44 (0)20 7409 8918 frabeneck@savills.com

Robert BucheleDirector+44 (0)20 7409 8007 rbuchele@savills.com

Henry TimmisAssociate Director+44 (0)20 7409 8915 htimmis@savills.com

Dan HeskethDirector+44 (0)20 7409 8008 dhesketh@savills.com

Richard BullockDirector+44 (0)20 7409 8006 rabullock@savills.com

TABLE 1

Key deals in December 2016

Table source: Savills

Daniel GauntAssociate Director+44 (0)20 7409 8857dgaunt@savills.com

Ben RaywoodAssociate (Research)+44 (0)20 7409 8791braywood@savills.com

Nick WellsAssociate+44 (0)20 7409 8916nwells@savills.com

Jamie OlleyDirector+44 (0)20 7578 7546jamie.olley@savills.com

Tom ReevesDirector+44 (0)20 7578 7549thomas.reeves@savills.com

David McArthurAssociate Director+44 (0)20 7578 7545david.mcarthur@savills.com

Address

SectorAreaSq ft

Tenure

Price Yield CV/sq ft Vendor PurchaserHouse No Street PC

FH/LH

U/x term

Gearing

City Point 1Ropemaker

StreetEC2

Office / Retail

707,242 FH £562.50 M 4.25% £795 Beacon Brookfield

30 Crown Place EC2 Office 197,481 FH £204.00 M 4.43% £1,033 Samsung SRA

Beijing Capital Development

Holding (Group) Co. Ltd.

King Edward Court &

St Martin's Court

10 10

Paternoster Square

Paternoster Row

EC4 Office 348,836 LLH222 220

peppercorn £1,000

£200.00 M 4.90% £1,147Oxford Properties

(50% share)Madison

International

21 New Street EC2 Office 60,088 FH c£42.50 M 4.19% £707 Aviva Private US Investor

68 Lombard Street EC3 Office 39,981 FH £33.00 M 4.58% £825 Schroders KanAm

Jamie BinstockAssociate Director+44 (0)20 7578 7548jamie.binstock@savills.com

Paul BassiSurveyor+44 (0)20 7299 3044pbassi@savills.com

Will RichardsSurveyor+44 (0)20 7409 8059wrichards@savills.com