Market comment and notable deals

• Investment volumes in July reached £553.37m across 14 transactions, taking overall turnover for the year (to July) to £6.15bn. This is 26% down on 2017 but 4% up on the five-year average of £5.92bn. Savills advised on 48% of all transactions (by volume) this month.

• Despite the levels of investment being broadly in line with previous years, the number of transactions is down, with 72 deals to date in 2018. This compares to the 2017 total (to July) of 83 transactions, which is 29% down on the five-year average of 93 deals. The relatively low number of transactions has clearly been impacted by a slow Q1, where there were only 20 deals, a result of the lack of available product at the start of the year.

• A notable transaction for July, saw Legal & General (advised by Savills) sell their long leasehold interest in Procession House, 55 Ludgate Hill, EC4 for £68.75m, reflecting a net initial yield of 6.04% and a capital value of £649 per sq ft. The building was developed in 1999 to provide approximately 105,944 sq ft of office, retail and ancillary accommodation. The offices are single let to Goldman Sachs until September 2024, subject to a tenants break option in September 2019. The property benefitted from planning consent for a John Robertson Architects designed scheme to create a striking new headquarters office building, through a comprehensive refurbishment and extension.

• M&G Real Estate completed their acquisition of 36 Queen Street, EC4 for £55m, reflecting a net initial yield of 4% and a capital value of £1,180 per sq ft. The freehold building was comprehensively redeveloped in 2013 and provides 46,609 sq ft of office and ancillary accommodation. The property is multi let to seven tenants at a passing rent of £2.37m per annum reflecting £50.83 per sq ft overall.

• In another transaction by a UK institution, Orchard Street Investment Management acquired 80 Clerkenwell Road, EC1 for £18.5m, reflecting a net initial yield of 4.63% and a capital value of £1,462 per sq ft. The Ben Adams Architects designed redevelopment completed in 2017 to provide 12,658 sq ft of office, showroom and ancillary accommodation. The freehold property is multi let to five tenants at a passing rent of £914,524 per annum which reflects a rent of £72.25 per sq ft overall.

• The above acquisitions highlight a trend for 2018, which has seen UK funds investing back into the City market. To date we have seen nine acquisitions from this buyer group totalling £761m, which compares with £493m invested for the whole of 2017.

• Sitting on large cash holdings UK funds are being attracted back by the liquidity and favourable yield offered in the City compared to alternative property classes.

• Asian investors continue to account for the largest share (by volume) of investment into the City, totalling approximately £3.6bn. However, this is 30% down on this point last year, reflected by the fact they have only accounted for 18 transactions to date in 2018.

• UK buyers head the number of deals so far this year at 33, which is 46% (by number) of all transactions. Total investment by domestic buyers is currently at £1.3bn, 34% up on this point last year, and compares to the £1.4bn they invested for the whole of 2017.

• Our prime City yield remains at 4% which compares with the West End prime yield of 3.25%.