MIDTOWN AND SOUTH BANK OUTPERFORM WEST END AND CITY AS LONDON’S MOST ATTRACTIVE INVESTMENT MARKETS
7 October 2015
Midtown and South Bank are once again the two leading office investment markets according to our latest research with Union Street Partners and MSCI for the first half of 2015 using the industry standard IPD UK Annual Property Index.
The Farebrother and Union Street Partners IPD Centre of London Office Investment Report H1 2015 highlights that the total returns for Midtown and South Bank are level pegging at 11.3% for the first six months of 2015.
In a trend which has continued from 2014, both Midtown and South Bank have exceeded the returns achieved by the West End and City in the first half of 2015, which posted figures of 9.2% and 10.1% respectively.
Performance in Midtown particularly has continued to strengthen since midway through 2014, with quarterly returns rising from 5.4% in Q1 2015, to 5.7% in Q2 2015.
With Midtown and South Bank the stand out markets, the investment performance of offices across central London remained impressive in the first half of 2015 with a total aggregate return of 9.9%, with a stronger second quarter figure of 5.3% building on the 4.3% achieved in the first quarter.
Capital values grew by a further 9.4% for offices in Midtown between January and June 2015, ahead of the central London average growth rate of 8.0%, and pushing values 15.5% above their previous high when the market last peaked in June 2007.
Midtown also boasted the strongest rental growth in London over the first six months of 2015, highlighting the continued popularity of Midtown among occupiers. Average market rents in Midtown rose by 6.8% between January and June. South Bank also continues to enjoy strong rental growth, firmly aligning this once fringe market, with it’s more established central London peers.
Alastair Hilton, Investment Partner at Farebrother and Union Street Partners, said: “Midtown has been a strong location for both occupiers and investors since the market recovery post 2009, and this momentum is showing no signs of slowing down. The results of this report underline the performance credentials of both the Midtown and South Bank markets, which remain amongst the most sought after platforms in the capital for investment.
He continued: “Both markets are underpinned by limited supply within the background of historically low availability rates. Asset pricing is now at a level where further yield compression is unlikely, so performance is more reliant on rental growth prospects and this is precisely what these markets offer. With a restricted development pipeline allied to major ongoing infrastructure improvements, the long term prospects for both markets remain robust.”
He concluded; “London is no longer all about the City and West End. Our capital city is beginning to evolve around a different axis, with new infrastructure and large scale development around Kings Cross, London Bridge and Farringdon giving the platform for Midtown and South Bank to take the stage as the true centre of London.”
Colm Lauder, Senior Associate at MSCI, added: “2015 has seen a continued momentum of the London real estate market, underpinned by sustained growth in capital values and rent. Midtown and South Bank have retained their position as the two stand-out markets, which is ultimately driven by buoyant occupier demand for office space in these increasingly sought after parts of the capital.”