West End Investment
Allsop has tracked around £1.3Bn of West End transactions in Q3, either exchanged or exchanged and completed in 23 deals with an average lot size of £56.5M. Allsop West End team were involved in two of these transactions over the quarter.
This brings the total for 2026 to £3.3Bn in 69 transactions. For context the 15 year average for Q1-3 is c.£4.25Bn – so the market seems to be running at 75% of the long term (albeit 50% of the heady days of 2015-17). Similarly, number of deals is also down by the same proportion. The City stats provide a similar picture – London as a whole is at around £6.5Bn against a long-term average of £9.5Bn. (and the £15Bn of Q1-3 2017 and 2018!).
We are tracking over £1.2Bn of stock at various stages of being under offer at present in the West End.
A handful of large transactions have helped contribute to the total volume: two £200m+ transactions in 1 St James’s Square (£291M purchased from The Lau family by KKCG) and 123 Victora Street (£211M purchased from Landsec by Seven Cities). There were a further two buildings, 27 Savile Row, and 43 Brook Green in Hammersmith over £100M.
It is hard to remember a quarter where the transactions reflected the wider sentiment in the market: the majority of the trades this quarter have been in the core Mayfair, St James’s and Soho markets – where in many cases purchaser’s optimism on future rental performance has bridged the gap with vendor pricing aspirations. Outside of these core locations where perhaps the bid/ask spread is wider, owner occupiers have been dominant purchasers, or the transactions reflect re-based pricing (eg 123 Victoria St). Owner occupiers were responsible for close to 20% of the market, buying in Hammersmith, Fitzrovia x 2 and Mayfair.
The other theme is tenure - all but one transaction was Freehold/Virtual FH.
One of the most interesting value-add investments is the sale of 123 Victoria Street to Seven Cities – £211M – having suffered a previous abortive sale. The building was originally launched by Landsec in July 25 at £265M. The price represents around £850psf and a 20% discount from the brochure price. Almost 8% initial yield for the UK SPV.
1 St James’s Square, SW1
123 Victora Street
Buyers and Sellers
Private UK and European investors dominated purchases – two Czech value-add buyers - KKCG buying in St James’s Square, their second major building having previously bought The Burlian, and SEBRE buying 21 Stephen Street. Savile Row was purchased by BNF - the French Perrodo family, behind Perenco. Perenco already own and occupy 8 Hanover Square, and BNF are invested in 25 Hanover Square. US opportunity fund SVP was one of the few US Op-Funds buying. Other buyers include a US family, Turkish group, and Sir Lloyd Dorfmann.
The sell-off from Asia based investors continued with The Lau Family/Lifestyle and the backers of Joint Treasure accounting for almost £400m of sales. A consortium of largely middle eastern investors sold Hammersmith, and BEAM/The Abu Dhabi Royal Family exited 16 Berkeley Street. Landsec and Schroders Capital also sold one asset each and Ares exited 25 Great Pulteney Street after a relatively short hold period.
Owner Occupiers
Owner-occupiers made up close to 20% of the market - Chinese JD.Com buying a completed 130,000 sq ft building in Brook Green Hammersmith for own occupation, reversing the flow of funds from Asia. Allsop advised Schroders Capital on the sale of 60,000 sq ft of Fitzrovia offices to Next PLC. Take 2/Rokstar gaming bought their own HQ in Fitzrovia for £63M, and a UK family bought a small building in Albemarle Street for part occupation.
Minerva, Telephone and Fitzroy House, Chenies Street - Allsop sale
16 Berkeley Street, Mayfair W1
New Stock & Existing Supply
We haven’t seen the usual flurry of new £20m+ stock during September/October – Smithson Plaza (former Economist Tower) is being prepared for market at circa £200m, as well as a £21M block on Wigmore Street. The process of “quiet testing” continues – for example with GPE reportedly sounding out investors on their recently completed £250M 30 Duke Street SW1 best in class development – albeit this has now been reported in the press – perhaps it will come to market far and wide?
There remains a significant supply of available/withdrawn but buyable stock – by our count around £5Bn of assets either formally or “quietly” on the market currently. And since the start of Covid a further £5Bn has been marketed and withdrawn.
Our team keep a close track of these assets – please reach out if you would like to run through our tracking list.
What’s next
Assets under offer which had in the main been scheduled to go through in Q3 include Ampersand Wardour Street (c £155m), 72 Welbeck Street - Abu Dhabi royal family selling to CBREGI (guide around £165M); Sedley Place, Oxford Street – Norges selling to Lasalle – quote price was £90M; Schomberg House, Pall Mall – £50s lot size, 1-3 Long Acre - £30s, 210 Pentonville Rd, c.£80s. – with this and other stock amounting to something approaching £1.5Bn
The key question for Q4 will be whether improving occupational fundamentals and continued rental growth in the best locations are sufficient to bridge the valuation gap that persists across much of the market – driven in part by high capex but also the changing macro-environment and gilt market – since our last commentary 3 months ago UK 10-year gilts have roughly moved from 4.8% to 5.4%. Current evidence suggests investors remain highly willing buyers where they can underwrite future rents in Mayfair, St James's and Soho, whilst owner occupiers are increasingly setting pricing benchmarks elsewhere – and for the time being outside the core, yields need to reflect the reduced rental growth prospects – for example 123 Victoria Street at close to 8% (Lot size also having an influence on the liquidity). The overall result is a market that remains active, but one where capital is being deployed with increasing selectivity.
Exit Yields
An often-discussed elephant in the room in the West End is the lack of evidence for Exit Yields - The well-publicised depth of bidding for 1 St James’s Sq and 27 Savile row show there are plenty of buyers willing to forecast continuing rental growth, and aggressive exit yields of say 4% off grown rents of circa £250psf rents.
30 Duke Street will hopefully provide some of that much needed “exit yield” evidence to the market – the reported £250m tag representing 4.5% - an exceptionally high-quality development let mainly to CD&R for 15 years at a rent reflecting £185psf. 125-year new leasehold from The Crown with 10% gearing. The price reflects around £3,850 psf capital value. But with virtually no new supply in the core Mayfair/St James’s market (spot many cranes?) and the likes of Grosvenor/Mitsui reportedly with two thirds of their c.150k sq ft South Molton Triangle office space under offer at rents potentially some way in excess of £250psf, the best rents continue to march on. We are already starting to see this constrained supply ripple out into rental growth for the likes of Fitzrovia KX and Victoria for the quality space.
