Savills World Research UK Commercial

City Investment Watch A busy December culminated in record turnover for 2014 GRAPH 1

Market comment and notable deals ■ December turnover was £3.1 billion across 25 deals, bringing the yearly turnover to £12.6 billion (Graph 1). ■ Total turnover for 2014 was 3% up on 2013 resulting in a record year for the City and Docklands investment market, eclipsing the volumes achieved during 2006/2007. This was achieved across 184 deals in 2014 compared with 170 in 2013. Furthermore, there were 33 deals in 2014 in excess of £100 million compared with just 24 in 2013. ■ The largest transaction of the month, and of the year, was the purchase of the HSBC Tower, E14 for £1.18 billion by QIA, Qatar's sovereign wealth fund. The purchase price equates to a net initial yield of 4.65% and £1,080 per sq ft. The building is let in its entirety to HSBC Bank Plc. ■ The City investment market in 2014 was dominated by Asian (33%) and UK (21%) purchasers (Graph 2). Worth noting, that by removing the HSBC deal, Middle East investors would have only accounted for 2% of total turnover, compared with 22% for 2013. ■ Moreover, the average lot size for Asian purchasers was £156 million, whereas UK purchasers represented the smallest average lot size at £26M. North American purchasers also preferred larger lot sizes as expected, with an average purchase of £125 million. This identifies the difference in the type of investment opportunities each nation would prefer.

January 2015 City turnover by quarter

■ Due to the large amount of turnover in Q4 last year there are only 16 properties currently being openly marketed. Furthermore, there is an additional £1.5 billion worth of investments currently under-offer. ■ In 2014, Institutions accounted for the vast majority of turnover at 77%, with Private Investors next accounting for 14%, while Property Companies accounted for 7% (Graph 2). Meanwhile, owner occupier deals only accounted for 2% of transactions, the most notable being the purchase of 111 Old Broad Street by China Construction bank for £111 million.

Source: Savills Research

GRAPH 2

City turnover by nationality & profile

■ The Docklands saw a substantial increase in investment. Total turnover for 2014 was £2.75 billion compared with £798 million invested there over the whole of 2013. Although, almost £2 billion of investment last year was in just two deals. ■ Savills prime yield is now 4.25%, which has fallen 50bps since the end of 2013. Furthermore, IPD City average equivalent yield fell from 6.4% to 5.9% at the end of the year (Graph 3).

Source: Savills Research

GRAPH 3

City yields

■ The average yield for a freehold investment in the City fell from 5.72% at the end of 2013 to 4.76% for 2014. Similarly, the average yield for a long leasehold fell from 6.19% to 5.35%.

Source: Savills Research, IPD

savills.co.uk/research

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City Investment Watch | UK Commercial TABLE 1

Key deals in December 2014 Address

Postcode

Sector

Area (sq ft)

Tenure

Price

Yield

Vendor

Purchaser

HSBC Tower

E14

Office

1,092,532

LLH

£1,18 M

4.65%

NPS

QIA

1 Tower Place

EC3

Office

379,112

LLH

£330 M

4.52%

Deutsche Asset Wealth Management

Ping An

Moorgate Exchange

EC2

Office

218,000

FH

£217 M

-

BlackRock Europe/CarVal Investors & Quadrant Estates

Brookfield

Milton Gate, 60 Chiswell Stree

EC1

Office

201,666

FH

£198 M

4.97%

AGC Equity Partners

Taikang Life

Bow Bells House, 11 Bread Street

EC4

Office/Retail

161,447

FH

£185 M

4.49%

Private Russian

Fubon

Stonecutter Court

EC4

Office/Retail

152,808

LLH

£112 M

5.63%

Hines Global REIT

Ivanhoé Cambridge

Houndsditch Estate

EC3

Office

326,000

FH

£100 M

-

Henderson

Madison International Realty

Source: Savills Research

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