Traditionally, the second half of the year outperforms the first half as investors look to deploy their capital and exchange before year end. However, the notable lack of supply continues to frustrate buyers as asset holders have a range of options open to them with record low financing rates meaning there is no desperation to sell.
At the start of July, there are only 19 buildings being openly marketed, worth £928.9m, at this point in 2018 there was £2.99bn, according to Savills.
Stephen Down, head of central London investment at Savills, explains:
“There continues to be huge amounts of money targeting London with activity only being held up by the lack of available opportunities. Owners of assets are in no rush to sell as London remains a top destination for investment which is evident by the level of interest that we are continuing to see.”
The lack of supply in the market has resulted in a lower number of deals compared to previous years (H119 £2.99bn vs H118 £5.67bn), however, appetite from investors remains strong with competitive bidding on attractive assets that do come to market. Currently, there is £1.45bn worth of assets under offer in the City of London.
An example of this is Paxton House, Artillery Lane, E1 which was sold by Aberdeen Standard Investments for £11.10m. The freehold, bought by GMS Estates, is a prominent corner ‘warehouse-style’ office building located 150 metres from Liverpool Street station, which is set to provide access to Crossrail.
The property provides 12,487 sq ft of office and ancillary accommodation and is multi-let to seven tenants, with vacant possession achievable in December 2019. The passing rent is £455,657 per annum which reflects a rent of £36.49 per sq ft overall. The highly competitive marketing process saw in excess of 90 inspections, showing the continued investor demand for value-add, well-located buildings.
Down adds: “The growing desire for value-add product in London and the robust leasing market reinforces the long-term prospects of the London market.”