City investment up 17% in H1, says Savills

Commercial property investment in the City of London reached £4.98bn in the first six months of 2017 – a 17% increase on H1 2016, according to Savills.

Demand for trophy assets was also high. The ten largest deals transacted in 2017 to date totalled £3.4bn, compared with the ten largest across the whole of 2016 which totalled £3.1bn. With more trophy assets expected to be traded in the second half of the year, Savills says it is almost certain 2017’s total turnover will surpass 2016. According to the research, Asian investors have continued to be the most active in the market, accounting for 50% of turnover in the City in H1 2017, with an average deal size of £147.39m. European investors were responsible for only 25% of turnover, but their average deal size was larger at £205m, Savills said. UK investors were responsible for 16% of turnover,  while activity from both US and Middle Eastern buyers has been relatively muted in 2017 with each representing 4% of total investment. Felix Rabeneck, director in the City investment team at Savills, said: “The City continues to have global appeal to investors with Asian buyers the most active, but interestingly, on average, European investors are striking the biggest deals. We expect the momentum seen in the first six months of the year to continue into the second half, with 2017 investment volumes overtaking 2016.”  In the first half of the year, Savills has been involved in £2.1bn worth of transactions in the City across nine deals. One notable deal in June was Deutsche Bank AG’s asset management arm’s acquisition of 2 & 3 Bankside, SE1 for £310m at a 5.01% yield and £747/ sq ft, which is let to RBS and sub-let in its entirety to Omnicom. Savills’ prime City yield remains at 4 %. The spread between the City and the West End is 75bps with the West End prime yield currently at 3.25%.