The knock-on effects of the Iran conflict have revived inflation fears, and combined with repricing in the UK gilt market, has caused swap rates to move out significantly over recent weeks. Valuers have responded by adjusting yields upwards (and capital values downwards) across all main property sectors.
West End
West End investment buildings are retaining their safe-haven status, and values remain robust. The occupational market continues to show positive rental growth and falling vacancy.
A key transaction is the off-market sale of 25 Great Pulteney Street, Soho, which completed in September- Royal London sold to Acai Properties for approximately £72m, reflecting a 4.2% yield and a capital value of around £2,500 psf. This is one of the best buildings in Soho and a good barometer: best-in-class assets in core locations are still achieving strong pricing.
Other recent deals demonstrate how pricing is widening with quality and risk:
- Sedley Place, Oxford Street (let to Boots) sold to La Salle for £83m at a 4.85% yield (£1,685 psf).
- 30 Cleveland Street sold to Take Two for £66m at a 4.61% yield (£1,650 psf) in August.
- 123 Victoria Street sold at the second attempt to Seven Cities for approximately £211m at a 7.89% yield (£861 psf). The building has significant vacancy and requires refurbishment, which justifies the higher yield.
City
The City market remains starved of stock, with a choked development pipeline. Given the lot sizes involved, buyers more often need debt, and in the current climate this has left them uncompetitive against vendors’ price expectations.
The key transaction is Duo House, 280 Bishopsgate, bought by Capreon/Hayfin for £320m (£1,200 psf) from Arax/CBRE IM.