UK Commercial & Residential Property Markets Review: July ... · Commercial property -London office market page 15 -Retail market page 15 Investment market -Residential page 16 -Commercial

UK Commercial & Residential Property Markets Review: July 2018 | 1


CONTENTS

Economic overview page 3

Residential property

- National sales page 5

- London sales page 7

- London new homes page 10

- National lettings page 11

- London lettings page 13

Commercial property

- London office market page 15

- Retail market page 15

Investment market

- Residential page 16

- Commercial page 18

Contact page 19


ECONOMIC OVERVIEW

GDP Growth

The ONS reports that UK GDP grew by 0.2% in the three months to May, a slight improvement on the

preceding rolling 3-month period in which zero growth was recorded. The modest growth was driven

by the services sector but was partly offset by falling construction and industrial output. Retailing,

computer programming and legal services all performed strongly while housebuilding and

manufacturing both contracted.

The latest Business in Britain report from Lloyds Bank reveals that business confidence in May edged

to a two-year high since the Brexit vote, with investment and hiring intentions remaining broadly

steady. The outlook for exports has improved, with a net 27% of exporters anticipating stronger

exports in the next six months, up from 24% in January. However, companies felt that Brexit

uncertainty and weaker UK demand remained the greatest risks in the short term.

The outcome of the Brexit negotiations is no clearer than it was at the beginning of the process. The

prospect of a “no deal” is still a possibility, while the Prime Minister’s latest proposals have drawn

fierce criticism from both inside and outside her own party. The concept of “compromise” seems to

be missing from all of the participants in the debate and time is fast running out.

The Treasury’s forecasting panel has lowered its 2018 GDP growth projection to 1.3%, down from

1.4% in June. A similar reduction – from 1.5% to 1.4% - was also made for 2019.

Figure 1: UK GDP growth outlook Source: HM Treasury Forecast Panel

Inflation & interest rates

Annual consumer price inflation was unchanged for the second month in a row at 2.4% in May,

although RPI inflation rose to 3.4% from 3.3%. The Treasury forecasting panel’s 2018 inflation (CPI)

forecast was held at 2.3% for the third month in succession, although the RPI forecast was lowered to

3.1%. Reductions in both inflation measures are forecast for 2019.

1.7%

1.3%1.4%

1.7%1.8% 1.8%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

2017 2018 2019 2020 2021 2022


The Bank of England’s Monetary Policy Committee did not meet in June and Bank Rate remains at

0.5%. Earlier in the year it was widely expected that there would be several increases this year,

however, this looks less likely now. Nonetheless, some commentators anticipate that the August

meeting will result in a 25 basis point increase. UK 3 month Libor rates have risen this month and as

at 17th July stood at 0.76%, while 5 year swap rates dropped again to 1.306%.

Figure 2: Inflation (CPI) & Bank Rate forecasts Source: HM Treasury Forecast Panel & OBR

Employment and earnings growth

The labour market continues to expand despite the sluggish performance of the economy. The latest

employment rate has risen to 75.6%, the highest since comparable records began in 1971. The latest

unemployment rate remains at 4.2%, the joint lowest since 1975.

Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms

have increased by 2.7% excluding bonuses, and by 2.5% including bonuses, compared with a year

earlier. Inflation continues to take its toll, however, and average weekly earnings for employees in

Great Britain in real terms have risen by just 0.4% excluding bonuses, and by 0.2% including bonuses,

compared with a year earlier.

0.50%

0.79%

1.10%

1.50%

1.83%2.05%

3.0%

2.3%

2.1%2.1%

2.1%

2.1%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2017 2018 2019 2020 2021 2022

Bank Rate (q4) CPI


RESIDENTIAL PROPERTY

National sales market

Land Registry data reveal that UK annual house price growth slowed for the third consecutive month

in May to stand at 3.3%, taking the average price to £226,351. In England, price growth fell for the

fourth consecutive month to reach 2.9%, with an average price of £243,583. At regional level, the

Midlands (East: 6.3%; West: 5.0%) are seeing the strongest annual price growth, while London is the

only region to record negative growth (-0.4%).

Figure 3: Average annual house price growth: UK & England Source: Land Registry/ONS

Figure 4: Average regional house price & annual price growth (May 2018) Source: Land Registry/ONS

3%

4%

5%

6%

UK England

6.3%

5.0%

3.9%

2.9% 2.9%2.4% 2.2%

1.3%

-0.4%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

£0

£50,000

£100,000

£150,000

£200,000

£250,000

£300,000

£350,000

£400,000

£450,000

£500,000

Ave price 12 month growth


Rightmove reports that new seller asking prices fell by 0.1% in the year to mid-July, while the

proportion of sellers already on the market that are reducing their asking prices is the highest at this

time of year since 2011. The number of properties coming to market rose by 8.6% compared to July

last year boosting the stock for sale per agent to its highest level since September 2015.

Figure 5: Average stock per agent (includes under offer/sold STC) Source: Rightmove

The UK’s housing affordability issues have prompted various suggested solutions in recent years,

however surely none more radical than the latest recommendation from the Institute for Public Policy

Research. The think-tank has proposed that the Bank of England should be given expansive new

powers to freeze house prices for a period of five years. Aside from the practicalities of trying to

enforce such a policy, this will disappoint homeowners expecting to make a capital gain on their

homes. The Government would additionally not see any growth in its stamp duty receipts.

Figure 6: Mortgage lending by type (no. of loans, nsa) Source: UK Finance

4950 50 50

4948

47

4342

43

45

47

50

52

30

35

40

45

50

55

60

0

10000

20000

30000

40000

50000

60000

House purchase Remortgage


Mortgage lending for house purchase in June rose by 3.6% compared to the previous month although

it was 4.7% down on the June 2017 figure. The average loan value for house purchase rose by 3.2%

compared to the previous month to reach £203,800. Re-mortgaging rose by 6.1% over the month and

was 3.4% higher than in June last year. Re-mortgaging as a proportion of total mortgage lending fell

to 63.2%, well below its 12 month peak level of 93.4% last November.

Figure 7: UK & England residential property transactions Source: HMRC

Although sale transactions (non-seasonally adjusted) rose on a monthly basis in June in both England

(+11.6%) and the UK as a whole (+13.0%), compared to June last year they were down by, respectively

8.3% and 8.8%. Annualising the first half year data suggests that 2018 full year sales in England are

likely to be around 10% down on 2017 and 10.6% lower for the UK.

London sales market

Land Registry data revisions show that annual price growth has dropped in the last four months in

London. This paints a slightly different picture from our last report in that prices now appear to be

under more sustained downwards pressure. However, the downward movement is not substantial –

less than 1% in each of the last four months – and there is still no indication of an imminent falling off

the cliff. Nonetheless, the market has clearly been slowing since last autumn and there is equally little

prospect of a pickup any time soon. Prices are falling in 20 out of London’s 33 boroughs on an annual

measure, and growth is below inflation in a further nine boroughs.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

UK England


Figure 8: Annual price growth by London borough (May 2018) Source: Land Registry

The average asking price of property coming to market in July was down by 0.5%, and was 1.7% lower

than July last year according to Rightmove. The steepest annual decline was recorded in Zone 1 (-

6.5%). Properties with two bedrooms and fewer saw the largest percentage price reduction over the

last 12 months (-3.5%). Properties with five or more bedrooms and four bed detached homes

experienced a 2.7% drop in prices over the same period.

-15.0% -10.0% -5.0% 0.0% 5.0% 10.0%

City of London

City of Westminster

Brent

Hammersmith and Fulham

Southwark

Hounslow

Kensington And Chelsea

Islington

Wandsworth

Lambeth

Merton

Ealing

Croydon

Newham

Camden

Harrow

Bromley

Barking and Dagenham

Waltham Forest

Richmond upon Thames

Barnet

Hillingdon

Kingston upon Thames

Haringey

Bexley

Enfield

Greenwich

Lewisham

Sutton

Redbridge

Havering

Tower Hamlets

Hackney


Figure 9: Annual asking price growth by London transport zone (July 2018) Source: Rightmove

The prime London residential market gathered momentum in the second quarter as buyers became

much more active, especially in the central locations. New applicant registrations were up by over one

third on Q1, and nearly 60% higher than in Q2 2017, while viewings were 25% higher than in Q1 and

nearly one third higher than in Q2 last year.

Vendors were also more in evidence, albeit to a lesser degree, as many appeared reluctant to accept

the prevailing market values, preferring instead to wait until prices matched their expectations.

Nonetheless, available stock at the end of June was over 10% higher than at the same point in 2017

according to Lonres.

Despite the increase in activity, buyer attitudes with regard to price have not changed and nearly half

of all properties marketed during Q2 experienced a price reduction according to Lonres, with an

average discount of 9.1% recorded. The gap between buyer and seller expectations inevitably

impacted upon actual transaction numbers which, according to Lonres, were 9.2% down on Q2 2017.

High stamp duty rates also continued to deter some buyers, while Brexit will also have been a concern

for some, in particular overseas buyers and financial services’ workers.

There was a further slight decline in capital values in the prime locations but the rate of decline has

slowed. The Chestertons Prime Capital Values Index recorded a fall of 0.4% over the quarter and a

2.5% drop over a 12 month period.

Calling the bottom of the market remains difficult, as in some prime locations the best properties

attracted multiple bids above asking price. However, there were more properties which required a

price drop in order to achieve a sales, with Lonres reporting that 48% of properties on the market as

at mid-July had had a price reduction.

-6.5%

-2.6%

-0.4%

-0.1%

0.0%

-0.6%

-7.0% -6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0%

Zone 1

Zone 2

Zone 3

Zone 4

Zone 5

Zone 6


London new homes market

Q2 new home sales volumes dropped by just over one fifth compared to the first quarter to reach

5,150. Nearly half (46%) of the 68,000 units under construction at the end of Q2 were unsold. 1,450

completed units also remained unsold at quarter end.

Build-to-Rent (BTR) units and purchases under the Help-to-Buy scheme continued to account for a

substantial amount of sales during the quarter – 39% in the case of BTR. The BTR pipeline of 56,500

units at the end of Q2 suggests that its importance to overall sales is likely to increase.

Figure 10: London new homes’ starts, completions & sales: q1 2013-q2 2018 Source: Molior

Figure 11: London BTR sales' numbers & as% of total sales Source: Molior

The development pipeline remains high: constructions starts rose by 8.5% during the quarter and

completions were 28.4% up on Q1. More worryingly, the number of unimplemented

0

2,000

4,000

6,000

8,000

10,000

12,000

Starts Completions Sales

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1+Q22018

BTR sales BTR sales as % of total sales


permissions at the end of Q2 stood at 176,000 private units alone, excluding developments of less

than 20 units. This is despite the fact that the volume of new applications has been reducing since

2014.

Analysis from Molior reveals that asking prices for new homes at the end of Q2 were 2% down on the

2017 year-end average. Nonetheless, the longer term performance is still impressive with 73% growth

recorded between 2010 and 2017.

Figure 12: Average asking price for London new homes Source: Molior

In an interesting move, the Government has announced it will introduce legislation which will require

all new builds to be connected to fibre broadband networks. It is not clear at present who will foot

the bill for this although the Government plans to consult on the matter in the autumn.

National lettings market

According to the Homelet index, average rents across the UK rose by 1.8% in June when compared to

the same month in 2017, taking the average monthly rent to £924. When London is excluded, the

average UK rental value was £767, up 1.3% on last year. At regional level, London (4.7%) recorded the

strongest annual rental growth while rents were flat in the South East.

The number of rental properties managed by letting agents rose in May, with 186 on average per

branch, according to ARLA. This is the highest figure recorded for this year and a 4% increase on the

previous month. In contrast, tenant demand weakened during May. The number of prospective

tenants registered per member branch dropped by 16%. This is the lowest level of demand seen since

December 2017. Supply remained highest in the East Midlands, where agents managed 286 properties

per branch on average.

£300

£400

£500

£600

£700

£800

£900

£1,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 q12018

q22018

£/s

q f

t

Source: Molior


Figure 13: Average monthly asking rents & annual growth by region (June 2018) Source: Homelet

According to ARLA members, 28% of tenants experienced rent hikes in May, up from 26% in April. This

is the highest level since August 2017, when 35% of landlords increased rents, and continues an

upward trend which has seen the number of landlords hiking rents rise every month since November

2017. The East Midlands was the worst affected region: 44% of tenants saw their rents increase,

compared to London where just 10% experienced a rent rise.

The average tenure across the UK rose to 19 months in May, most likely a reflection of a general

shortage of available stock and tenants not wanting to undergo the expense and hassle of looking for

alternative accommodation – in spite of the rise in the number of rent increases.

Figure 14: Household rent to income ratio by region (June 2018) Source: Homelet

4.7%

4.1%

2.3%

1.3% 1.3%1.0%

0.8% 0.8%

0.0% 0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

£0

£200

£400

£600

£800

£1,000

£1,200

£1,400

£1,600

£1,800

London WestMidlands

Yorks &Humber

EastMidlands

NorthWest

East ofEngland

SouthWest

NorthEast

Ave rent 12 month growth (%)

24.8%

27.2%

29.0%

29.8%

30.2%

30.8%

32.2%

32.5%

33.5%

33.8%

37.1%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

North East

Yorks & Humber

North West

East Midlands

West Midlands

UK (Excl. London)

UK

East of England

South East

South West

London


Meanwhile, affordability continues to deteriorate. Data from Homelet reveals that the average UK

household rent-to-income ratio rose to 32.2% in June, up from 28.6% in June last year.

London lettings market

The Homelet index shows that annual rental growth in Greater London rose to 4.7% in June, taking

the average rent in the capital £1,596 per calendar month. Tenant demand in June was strong with

ARLA reporting 71 prospective renters registered per member branch, the highest figure recorded

among UK regions. At borough level, annual rental growth remains strongest in Camden and the City,

both at 16.1% in June, and weakest in Brent (-3.4%) and Croydon (-2.0%), the only two boroughs to

record negative annual rental growth.

The prime London lettings market was more active in the second quarter, with new applicants

registered and viewings seeing a substantial increase compared to Q1. This improvement reflects a

number of factors: an increase in available properties, more landlords prepared to entertain

reductions on asking rent and more tenants needing to finalise their accommodation requirements.

Nonetheless, the market remained difficult as tenants were still very selective and acutely sensitive

with regard to pricing unless a good quality property was involved. Consequently, transaction

numbers only rose by around 5% over the quarter.

Tenancy renewal numbers rose by nearly 21% over the quarter and were 9% up on Q2 last year. This

reflects fewer new rental properties coming to the market, with tenants opting to stick with the status

quo and landlords happy to avert void periods.

Although the Chestertons Prime London Rental Index recorded a slight fall of 0.3% in Q2, there are

further signs that values are stabilising. In the year to end-June, rental values dropped by just 0.3%

compared to a fall of 2.6% at the end of the previous quarter.

While tenants remain inflexible with regard to their accommodation budgets, prime rents are likely to

remain under downwards pressure in those locations where available stock remains high. However,

this will not be the case in all prime markets and we have already witnessed a stabilisation in rental

values, and even some growth, in those locations where supply and demand is more balanced.

The potential elephant in the room is how smaller part-time/accidental landlords with mortgaged

properties will react to the phasing out of the 100% tax relief on finance costs. If they decide to sell to

owner occupiers in greater numbers, resulting in a reduction in supply, this could help to support

rents.


Figure 15: London borough monthly asking rents for 2-bed flats (as at 25 July 2018) Source: Zoopla

£1,100

£1,175

£1,250

£1,270

£1,318

£1,348

£1,360

£1,370

£1,400

£1,414

£1,491

£1,525

£1,611

£1,612

£1,613

£1,666

£1,681

£1,690

£1,715

£1,821

£1,823

£2,118

£2,175

£2,270

£2,303

£2,327

£2,358

£2,896

£2,934

£3,910

£4,364

£0 £500 £1,000 £1,500 £2,000 £2,500 £3,000 £3,500 £4,000 £4,500 £5,000

Bexley

Sutton

Barking & Dagenham

Croydon

Redbridge

Bromley

Hillingdon

Enfield

Harrow

Waltham Forest

Kingston upon Thames

Lewisham

Greenwich

Barnet

Haringey

Newham

Brent

Hounslow

Ealing

Richmond upon Thames

Merton

Lambeth

Hackney

Wandsworth

Southwark

Tower Hamlets

Islington

Hammersmith & Fulham

Camden

Kensington & Chelsea

Westminster


COMMERCIAL PROPERTY

London office market

Q2 office take-up in central London was around one fifth higher than in the previous quarter, although

this needs to be placed within the context of a relatively weak first quarter. However, not all

submarkets saw an increase – take-up in both the West End and Docklands was lower.

Demand for flexible office space was again an important contributor to the quarterly total, accounting

for nearly 30% of take-up. The Q3 figure will receive a significant boost with the announcement that

Facebook will pre-lease 611,000 sq ft across three buildings which will now be built at King’s Cross

Central, housing 6,000 workers, marking one of the largest London leasing deals in the last decade.

This takes Facebook’s total London office space to over one million sq ft.

Central London availability dropped to 6.1% in Q2. The availability of newly completed space fell by

10% but second-hand availability rose to its highest level since Q2 2010. At submarket level,

availability at the end of the quarter stood at 7.7% in the City, 4.8% in the West End and 9.3% in

Docklands.

Headline prime rents in the City stand at £70/sq ft per annum, compared to £110/sq ft per annum in

the West End. Typical rent-free periods on a 10 year lease are around 24 months in both the West End

and the City.

Retail market

Some brighter news from the retail sector this month. The ONS reports that in the three months to

June 2018, the volume of retail sales increased by 2.1%, the largest increase since February 2015, with

growth across all main sectors. However, whilst high street footfall rose, this was not the case for retail

parks and shopping centres, where footfall declined.

Food stores saw the strongest three-month on three-month growth since May 2001 at 2.2%, with

feedback from supermarkets suggesting that the continued good weather and World Cup celebrations

had encouraged food and drink sales. However, there was a decrease in footfall in non-food stores

which, along with non-store retailing, resulted in a monthly decline of 0.5% in the quantity bought.

Online sales as a proportion of all retailing remained unchanged at 18.0%. Online spending in clothing

and footwear stores continued to achieve new record proportions, for the fourth consecutive month,

at 17.5%.

A reduction in food price inflation throughout the heatwave allowed overall shop prices to fall in June,

although the drop was not as sharp as it was in May. According to the monthly BRC-Nielsen Shop Price

Index, overall shop prices were 0.5% lower last month compared to June 2017. On a month-on-month

basis, the decline was smaller than May’s 1.1%.

The index shows shop prices in deflationary territory for 62 consecutive months now, which indicates

retailers are feeling pressured to offer discounts to attract customers. The index also showed that

food inflation held steady at 1.2% in June. Meanwhile, non-food prices fell by 1.6% – less steep than

May’s 2.5% decline and the lowest rate of deflation since December 2017.


Profit warnings from FTSE-listed retailers have doubled in a year, as the sector has faced rising costs

and a squeeze on consumer spending. According to research from EY, there were 20 profit warnings

from listed retailers in the first half of 2018, double the number issued in the same half-year period in

2017. Retailers such as Debenhams, Moss Bros, Carpetright, John Lewis, Eve Sleep, Dunelm and Card

Factory are among those who have issued profit warnings so far this year.

Retail warehouse vacancy rates rose sharply in the second quarter of the year, as the effects of

company voluntary arrangements (CVAs) began to spill over from the high street to out-of-town retail.

Research from Trevor Wood Associates showed that vacancy rates rose from 5.1% at the end of Q1 to

6.3% at the end of Q2, reversing a downward trend that had persisted since a 10% peak in vacancy

rates in mid-2013.

A report from a team led by retail expert Bill Grimsey has concluded that bricks-and-mortar retailing

can no longer be the anchor for high streets. The review said high streets must instead become

community hubs that include housing, offices and some shops. The review comes in the wake of a

wave of closures and restructurings from major high street names and an ongoing shift to online

shopping. The first six months of 2018 have seen the highest rate of retail closures, administrations

and CVAs for more than a decade and there is no sign of a slowdown.

The study group wants to replace business rates, create a Town Centre Commission to develop a 20-

year strategy for local high streets and accelerate digital transformation in smaller towns. Other

recommendations include the appointment of “high-quality” designers to celebrate the historic

character and local identity of town centres, 30 minutes’ free parking in high streets with no paid

extension option, improved street lighting and free public wifi.

INVESTMENT MARKET

Residential

ARLA reports that the number of landlords selling their Buy-to-Let (BTL) properties remained at a

record-high level in May of five per member branch, the highest number since records began in 2015.

This follows a survey from the National Landlords’ Association (NLA) which found that 19% of its

members intended to offload properties over the coming year.

Significantly, only 7% of landlords who plan to sell said they intended to sell to other landlords,

signalling renewed hope for many first time buyers and homeowners looking to progress up the

property ladder – but implying a reduction in rented stock unless other landlords intended to increase

portfolios to a similar degree.

The number of new BTL mortgage loans for house purchase rose by 10% in May, somewhat surprising

given recent survey evidence suggesting that many landlords intended to sell rather than buy,

although the figure was nearly 10% down on May last year. Part of the reason may be due to the fact

that increased competition between lenders has seen them identify first-time landlords as a key

market to acquire new business.

https://www.buyassociation.co.uk/2018/06/27/support-for-aspiring-landlords-as-applications-double/


As their existing borrowers reassess options as their current terms reach an end, providers are busy

targeting new customers to expand their mortgage books. According to Moneyfacts there has been a

13% increase in the number of deals available to first-time landlords since the start of this year. There

are now 1,268 BTL products available to landlords entering the market. Meanwhile, BTL re-mortgaging

increased by 2.1% in May compared to April and was a sizeable 15% up on the May 2017 figure.

Figure 16: Buy-to-let mortgage lending Source: UK Finance

Each month brings news of new investment from major corporates and funds in the private rented

sector. Legal & General has co-invested with Dutch asset manager PGGM to acquire the Macbean site

in Woolwich. The scheme, which is subject to planning approval, is expected to deliver over 650 new

homes, together with 21,000sqft of commercial space and a new public square.

Legal & General Investment Management is also nearing a deal with Renaker to forward purchase the

350-flat tower D on the 1,508 home Owen Street development in Manchester, which will be part of

the UK’s tallest residential scheme. In total, L&G has a BTR pipeline of around 3,000 homes across nine

schemes countrywide and plans to have 6,000 homes in planning, development or operation by the

end of 2019.

M&G Real Estate’s UK residential property fund has agreed an £82.7m deal to buy 186 new homes in

London from Redrow Homes. The deal will fund the delivery of one, two and three-bedroom build-to-

rent (BTR) homes at Redrow’s Colindale Gardens development in Colindale, with completion expected

by 2021. The deal marks M&G UK Residential Property Fund’s third BTR transaction this year, bringing

its residential portfolio to around 2,500 units.

The joint venture between Moda and Apache Capital has unveiled plans to develop a landmark £220m

build-to-rent (BTR) village in Brighton & Hove. The nine-acre site on Sackville Road, BN3, shares a

boundary with Hove station and is a short walk from the city's seafront and existing retail and leisure

destinations. The proposed 'urban village' has capacity for up to 860 homes of mixed tenure as well

as substantial amount of employment space. Long-term tenancies of up to five years will be offered,

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

No. loans for house purchase No. loans for remortgage

https://www.buyassociation.co.uk/2018/06/05/build-to-rent-becoming-more-mainstream-as-landlords-consider-options/

https://www.buyassociation.co.uk/2018/07/02/low-purchase-price-key-to-getting-best-buy-to-let-yields-for-landlords/

https://www.buyassociation.co.uk/2018/06/21/location-is-key-for-best-rental-yields-for-buy-to-let-landlords/

http://hub.ipe.com/mg-investments-real-estate-homepage/415584.supplier


with all residents having access to all of the amenities and facilities. It will be interesting to see if this

concept will be replicated elsewhere across the country.

There have also been several recent major corporate and portfolio acquisitions, including:

LoneStar has initiated the sale of Quintain

British Land has entered into talks to buy Fizzy Living

Oxford Properties has formed an investment partnership with Delancey’s Get Living.

Delancey focused on the build-to-rent market with initial capital commitments of £600m.

Universities Superannuation Scheme (USS) and Places for People have agreed a £330m joint

venture which included USS acquiring a seed portfolio of residential assets for circa £150m.

The wind of change in the UK’s private rented sector is slowly but surely gaining momentum.

Average gross yields on bulk residential investment transactions in prime London ranged between

4.25% and 5.00% in June, with the higher end of the spectrum in outer London. The Chestertons Prime

London Yield Monitor reported that gross initial yields on individual resale properrties rose to 3.1% in

June. Prime central London yields were unchanged at 2.6%. Yields at submarket level ranged from

4.7% in Canary Wharf down to 2.0% in Knightsbridge/Belgravia.

Commercial

Co-Star reports that more than £3bn of commercial real estate was transacted in June as investors

from all over the world continued to target London. The deals, either exchanged or completed, were

predominantly in the City of London and driven by Asian investors who accounted for just under 70%

of the deals by volume. However, investors from the UK made a resurgence, contributing 16.5% of the

total volume, while investors from mainland Europe contributed 11.4%.

The major deals included:

Mitsui Fudosan’s sale of the long leasehold interest in 70 Mark Lane in the City of London, EC3

to Korean asset manager Korea Investment Management (KIM) for £200m, reflecting a yield

of 4.6%.

In Stratford, Lendlease and LCR completed a deal to forward sell S9, the 278,000 sq ft under-

construction office building at Stratford’s International Quarter London to DWS – formerly

Deutsche Asset Management - for around £240m.

Also in Stratford, Legal & General completed a circa £250m deal to forward fund the

construction of M7, at 14 Westfield Avenue, an office scheme which has been pre-let to the

Secretary of State for Communities and Local Government to establish a new HMRC regional

centre.

In the West End, Oxford Properties and Richemont completed an off-market deal to sell

Belstaff House, 135-137 New Bond Street, to a private Singaporean investor reflecting a 3%

yield.

Singapore listed investor, Ho Bee Land, completed its £650m acquisition of Ropemaker Place,

a trophy City of London office development, from a consortium led by AXA Investment

Managers - Real Assets.

http://property.costar.com/Property/Detail/Detail.aspx?ID=7559899



http://www.costar.co.uk/en/assets/news/2018/June/LG-to-forward-fund-HMRCs-Stratford-centre-in-250m-deal/

http://www.costar.co.uk/en/assets/news/2018/June/LG-to-forward-fund-HMRCs-Stratford-centre-in-250m-deal/


CONTACT

Chestertons is one of London’s largest estate agencies and has a network of over 30 offices offering

sales and lettings services, in addition to a strong international presence including Caribbean, Middle

East, Monaco, France, Spain, Portugal, Switzerland and Australia. For further information please

contact one of the following:

Nicholas Barnes John Woolley Head of Research Head of Valuation T: +44 (0) 20 3040 8406 T: +44 (0) 20 3040 8513 E: [email protected] E: [email protected] The contents of this report are intended for the purpose of general information and should not be relied upon as the basis for decision taking on the part of the reader. Although every effort has been made to ensure the accuracy of the information contained within this report at the time of writing, no liability is accepted by Chesterton Global for any loss or damage resulting from its use. Reproduction of this report in whole or in part is not permitted without the prior written approval of Chesterton Global. July 2018.

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Documents

UK Commercial & Residential Property Markets Review: July ... · Commercial property -London office market page 15 -Retail market page 15 Investment market -Residential page 16 -Commercial