Supply begins to increase as transactional activity lags
Q2 saw subdued activity, with total H1 turnover reaching £2.6 billion across 42 transactions, reflecting a 26% increase on the five-year average by volume but a 14% decrease by number of transactions. The quarterly turnover totals £815 million across 17 transactions.
Investment volumes in June totalled £289 million across five transactions, representing only a slight uptick in the monthly volume of deals compared to May. The largest trade of Q2 was Delancey and Aware Super’s acquisition of 11–12 Hanover Square, W1, from Aviva/PSP Investments above the original quoting price following a competitive bids process, highlighting the continued investor demand for prime offices in core locations. Other notable transactions included 20 Manchester Square, W1, also acquired by Delancey and Aware Super, and 123–151 Buckingham Palace Road, SW1, where Tishman Speyer acquired a minority interest.
Overall, Savills is tracking 29 deals under offer, totalling £1.24 billion, compared to just £668 million across 22 assets at the same point last year, with the largest being GPE’s One Newman Street, W1, for an estimated £244.5 million. In terms of lot size liquidity, we continue to see consistently strong demand in the £0–20 million and £20–40 million brackets, with 35 deals recorded this year, an increase of five since April in this range.
An analysis of purchaser nationalities reveals that while European investors accounted for 50% of turnover, two-thirds of this was Norges’ acquisition of stakes in two portfolios. Domestic investors remained dominant in terms of number of acquisitions, accounting for just under half of all trades and 29% of volumes.
Given ongoing macroeconomic uncertainty, investors are exhibiting increased caution when deploying larger amounts of capital, a trend likely to persist until the geopolitical outlook stabilises. On a more positive note, supply is beginning to increase, with £1.38 billion of volume across 30 assets brought to market in Q2.
Notably, Savills and RX are jointly marketing the sale of Hines’s Grainhouse, WC2, at a quoting level of £153 million, 4.50%, £1,695 per sq ft. Winner of the BCO Best Corporate Workplace Award in 2024, the property offers 90,256 sq ft of best-in-class office and retail accommodation. It is multi-let to four office tenants anchored by Hines and four retail tenants, with a WAULT of 8.9 years to expiries. The property is held on a long leasehold from The Mercers’ Company, with 123 years unexpired at a gearing of 3.00% per annum.
Additionally, Savills is advising Picton Capital on the disposal of the Stanford Building, 12–14 Long Acre, WC2. This freehold property, newly developed and completed in 2021, comprises a characterful warehouse-style retail and office building of 20,506 sq ft. It is fully let at now reversionary rents, with 65% of income subject to review within the next two years. Savills is guiding £38 million, 4.13%, £1,853 per sq ft.
Savills prime yield stands at 3.75%, and the SONIA five-year swap rate is 3.73%.