London commercial property continues to defy Brexit jitters as investment activity in February demonstrates an ongoing resilience against political and economic headwinds, according to Savills.
Figures from the international real estate advisor shows turnover in the City of London in February reached £535.9m across eight deals – the highest turnover for the month since February 2015 – while £345m was transacted in the West End office market across seven deals.
Savills notes that despite the first few months of any year being some of the quietest, deals to date in 2019 demonstrate that appetite for London real estate remains and, while some investors are choosing to wait for clearer certainty around Brexit, others continue to spend.
Overall, since the beginning of the year volumes are down on the long term average. The City sees a total of £647.2m, marking a 4% decline on 2018 figures, and 29% down on the long term average (£918m) for the first two months of the year.
In the West End, total turnover for the first two months of the year reached £475m, in line with 2018’s performance but down on the long term average (£1.03bn).
UK investors account for the largest share of investment in the City in 2019 (63%), while European buyers account for the lion’s share (62%) of activity in the West End, says Savills.
Key deals include: Brockton Capital’s acquisition of 169 Union Street, SE1 for £100.25m, reflecting a net initial yield of 4.25%; Henderson Park/Dukelease acquiring the freehold interest in Ibex House, EC3 for £121.25m(4.95% NIY); and a private European investor acquiring freehold offices offered with vacant possession at 26 St James’s Square, SW1 for £34m.
Stephen Down, head of Central London investment at Savills, comments: “Although the first quarter of any year tends to be quieter, there is undoubtedly a degree of caution in the market at the moment because of Brexit. However, there are a number of investors that see this as an opportunity.
“Those deals that are offered to the market still seem to draw in a healthy level of prospective buyers particularly in the development, opportunistic and core plus space. There has been an element of repricing in core assets recently, but marginally so, and where properties have struggled to sell it is more to do with over-ambitious pricing expectations from the outset than a lack of interest from buyers. We continue to receive regular fresh enquiries through our overseas offices and assuming we have an acceptable solution to Brexit by the end of March then we expect investors to return with greater desire to transact in the second half of the year.”
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