UK investor market share at its highest for the first time in over a decade
Market comment and notable deals
- June saw volumes of £551.4m across 12 transactions, exceeding average monthly turnover this year but worryingly 22% down on the five-year average monthly figure (£640m). This continues the trend of subdued investment volumes this year, which as we have previously commented, is driven by supply rather than demand.
.png "Key deals in June 2018")
TABLE 1 | Key deals in June 2018
Source: Savills Research
- Total investment turnover for the first half of 2018 stands at £3.0bn across 60 transactions, down 26.5% on H1 2017 in volume terms but stable in terms of deal number.
- In the largest deal this month, a joint venture between Aviva and PSP Investments has sold the long leasehold interest in 30 Warwick Street, W1, JLL’s UK headquarters until mid-2021, to the joint venture between The Crown Estate and Norges Bank. The Crown Estate owned the freehold and this purchase – in which they acquired a 75% stake – continues to strengthen the Regent Street Partnership’s strategic buying power which started in 2010. The 116 year interest traded for £115m and a capital value of £1,533 per sq ft.
- The appeal of both prime Mayfair and leisure assets has held strong, demonstrated by the sale of 17 Berkeley Street and 33 Dover Street, W1, home to the acclaimed restaurant, Park Chinois. The property was acquired by a Private investor for £42.5m, reflecting a current yield of 2.40%. However, based upon the settlement of two rent reviews, one outstanding from August 2017 and the other in June 2019, the reversionary yield is estimated to be over 4.50%.
- UK investors' dominance of market share in the year to date has hit a level not observed since 2007 when their piece of the pie reached 51% by volume (64% by deal number). UK investors account for 44% of acquisitions by volume (£1.3bn) and 48% (29) by deal number this year to date (see Graph 1).
.png "H1 Purchaser activity by location")
GRAPH 1 | H1 Purchaser activity by location
Source: Savills Research | Note: Data to end of June 2018
- Activity in H1 from four London REITs, two of the biggest institutions and one of the UK’s wealthiest individuals has accounted for over 60% of domestic buys by volume.
- Countering the typical seasonal slowdown we have recorded 16 properties totalling £995m being openly marketed in June, making it the most active month of 2018 so far in terms of new opportunity.
- The MSCI average net initial yield remains at 3.4% for the second consecutive month whilst the equivalent yield moved out just 1 bp to 4.67%. Savills prime yield remains at 3.25% (see Graph 2).
.png "West End yields")
GRAPH 2 | West End yields
Sources: Savills Research, MSCI