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The UK’s largest ever single office building deal significantly boosts central London commercial market following investment from Hong Kong

The UK’s largest ever single office building deal has significantly boosted central London’s commercial market helping the sector go from strength to strength. There was a prediction of a post Brexit catastrophe, though this is yet to be seen and in actual fact, total turnover is 24% in July, year on year. As much as £2.352 billion was invested in central London’s commercial property in July alone, taking total turnover for 2017 to the end of July to £11.5 billion.

Undoubtedly, July was the strongest month recorded for the City for over ten years, dating back to March 2007, recording a trade of £2.1 billion, something vastly boosted by the sale of 20 Fenchurch Street, also known as the Walkie Talkie. The sale totalled £1,282.2 million and was purchased by Hong Kong based Infinitus Property Group. Elsewhere, in London’s West End market, £252 million was transacted.

As of the end of July, Asian investors had accounted for as much 63% of total City turnover in the year thus far, followed by European investors at 17% with UK investors in at third at 11%. In the West End market, Asian investors accounted for approximately 50% of turnover to the end of July, with UK institutions accounting for just 2% of acquisitions by turnover, a stark contrast so to speak.

Research also indicates that the sale of Walkie Talkie, the largest ever single office building deal recorded in the UK, accounted for 61% of City turnover in July, pushing the entire monthly average lot size up to £190.92 million. In the West End, July’s largest deal was the sale of a 125-leasehold interest in Golden Cross House, 450-460 Strand, to Motcomb for £68.25 million.

The first six months of 2017 saw central London investment increase by 12.3% on the same period last year and whilst we are only a few months into the second half of the year, the momentum is continuing and total 2017 investment volumes are on course to surpass those of last year. This was something that many did not think possible following the uncertainty surrounding the triggering of Article 50 as well as the misgivings prior to, and following June the 8th’s election.

Though the restrictions announced in early August by the Chinese government will reduce real estate investment from mainland Chinese property developers and institutions, investors from Hong Kong (who have been particularly busy in the market in the past year) are tipped to continue to be active.

That said, it has been noticed that their buying criteria is becoming increasingly selective. It is expected that more stock will come onto the market as the end of 2017 nears as existing owners of investments take profits, and provided such sales are priced correctly, a continued strong turnover activity of the rest of the year is expected. Prime City yield is currently around the 4% mark whilst the prime West End yield is 3.25%, thus such figures should not differ too much come the end of the year.

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