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
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
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