Momentum continues to build as May sees highest number of deals this year
May saw another eventful month of transaction activity with £181.9m trading across nine deals, reflecting an average lot size of £20.12m and the highest number of deals in a month so far this year. The year-to-date volume at the end of May stood at £1.62bn across 29 deals, reflecting an average lot size of £55.7m, which is 24% down in terms of volume and 15% down by number of deals when compared to the five-year average. However, the year-to-date total for 2025 is nearly three times higher than at this point last year, and with £1.11bn of stock currently under offer and a further interest cut to the Bank of England base rate during May, the signs of recovery continue to build momentum.
In the largest deal of the month, Whitbread purchased Dorset House, 27–45 Stamford Street, SE1, acquiring the freehold interest from Capital 38 for a sum of £47.5m, reflecting £546 per sq ft. Located on the Southbank, approximately 300 metres to the north of Southwark station, the building comprises 87,070 sq ft of office accommodation and was sold with full vacant possession. The property was acquired by Whitbread, the UK’s largest hotel business, which is targeting a change of use from office to a 400-bedroom hub for their Premier Inn hotel brand. The transaction further highlights Whitbread’s expansion into Central London and follows its acquisition of 35 Red Lion Square, WC1, in February this year, and is a reminder that although value-add processes are beginning to see returning competition from office investors, the demand for office-to-hotel conversion still remains strong.
In the next largest deal of the month, the freehold interest in St Paul’s House, 8–12 Warwick Lane, EC4, was acquired by an owner-occupier for a sum of £40m. The property is located approximately 250 metres to the west of St Paul’s station, and comprises 37,068 sq ft of office accommodation. The building is approximately 60% vacant and generates a rent of approximately £1.9m per annum. The purchaser, Italian confectionery company Ferrero Rocher, acquired the freehold interest from a Private UK vendor for a sum of £40m, reflecting £1,079 per sq ft, and will use the building for its own occupation. In a leasing market seeing City rents at record levels and capital values at a discount to historic pricing, this deal is another example of an occupier opting to purchase an office building instead of taking a lease.
In another major deal, M&G purchased Equitable House, 47 King William Street, EC4, acquiring the freehold interest from DWS for a sum of £35m. Located on the east side of King William Street, Equitable House is a freehold corner building comprising 44,955 sq ft of office and retail accommodation. The property is multi-let to five office and two retail tenants with vacancy on the fourth and part-second floors, providing a topped-up rent of £2,855,655 per annum, reflecting £63.52 per sq ft overall, and a WAULT of 2.6 years to expiries and 1.7 years to breaks on the let accommodation. After a highly competitive bidding process, the property was ultimately acquired, above quote, for £35m, reflecting 7.64% net initial yield and £779 per sq ft. The deal marks M&G’s first acquisition in the City market since 2021, and with other UK institutional funds such as L&G and Aberdeen also acquiring Central London offices over the last nine months, the potential return of one of London’s key investor groups is another cause for optimism.
In terms of the macroeconomic climate, despite ongoing geopolitical turbulence and rises in UK inflation, the Bank of England’s Monetary Policy Committee voted to cut the base rate to 4.25% on May 8th, representing a fourth consecutive rate cut since August 2024.
With interest rates receding and a growing quantity of available stock in the market (Savills is currently tracking £2.62m of available stock across 63 deals), it seems that the effects of the two most inhibiting factors for the depressed markets of 2023 and 2024 are gradually subsiding. With transaction activity on the rise and more stock coming to market, conditions look favourable for momentum to continue.
Savills’ City prime yield is 5.25%, while the West End prime yield is 3.75%.