Record first quarter for London office investment

The first quarter of 2017 was the most active Q1 ever for London offices with a total of £4.9bn transacted.

Figures from CBRE show the highest quarterly total since Q4 2014 with overseas investors once again dominating the market; accounting for 80% of all transactions by volume.

In a continued vote of confidence in the London market, a total of 13 deals of £100m or larger transacted in Q1 2017 compared with 11 in Q4 2016. Appetite from overseas investors for large lot sizes remained undiminished with nine of the 13 deals purchased by an overseas party, building on their 74% contribution to the £4.1bn transacted in Q4 2016.

The quarter also included one of the largest UK investment transactions of all time as Hong Kong-based CC Land acquired The Leadenhall Building for £1.15bn. Boosted by the Leadenhall deal, Asian investors represented the largest share of overall investment transactions at 50%, followed by European investors at 23%.  

Stephen Pearson, head of City investment at CBRE, said: “The momentum we experienced at the end of last year has shown no sign of abating in the early months of 2017 and London remains a central focus for international capital requirements.

“This is a great endorsement of London’s continued appeal and testament to its resilience and ability to adapt and diversify. Appetite from overseas investors for large lot sizes, particularly in the City, will be a key feature of the market for the remainder of the year.”

After moving out by 25bps to 4.25% in Q2 2016, prime City yields reverted to their pre-referendum level of 4.0% as a result of strong investor demand while prime West End yields remained at 3.75% in Q1 2017.

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