Central London Market Report Q4 2012 - Jones Lang LaSalle

6 On Point • Central London Market • Fourth Quarter 2012
The Central London Market
Investment Volumes & Yields
£15.4 billion of investment stock changed hands in Central London
in 2012, with £4.2 billion invested in Q4 alone. That is the highest
£120.00
total since 2007 by a wide margin. Between Central 2008 and London: 2011, Prime total Headline Rents: 2002 to 2011 Q2
£100.00
Source: Jones Lang LaSalle
investment spend ranged from
Central
£6.5 billion
London:
to £11.6
Prime
billion
Headline
per
Rents: 2002 to 2011 Q2
annum. In fact only two years
£120.00
Source: have exceeded Jones Lang this LaSalle year’s total since £80.00
our records began Central in 1989 London: £120.00 and these Prime were Headline 2006 and Rents: 20072002 when to 2011 Q2
£100.00
Source: Jones Lang LaSalle
£60.00
volumes reached £17.3 billion and £18.7 billion, respectively.
£ per sq ft
June 02
June 03
June 04
June 05
June 06
June 07
June 08
June 09
June 10
£ per sq ft
June 11
Central London: Prime Headline Rents: 2003 to 2012
Source: Jones Lang LaSalle
£120.00
£100.00 £80.00
£40.00
West En
Once again £100.00 overseas investors £80.00 have been the driving force,
£60.00
accounting for 74% of the money invested in Q4 and 75% in the
£80.00
£60.00
year as a whole - a total of £11.5 billion. £40.00 Most of this went to the City
£20.00
£0.00 West End
City
Docklan
market -
£60.00
£7.34 billion, or 82%
£40.00of the total. In the West End the
£20.00
division was slightly more balanced with 64%, or £3.8 billion, of the
West End City
investment £40.00 coming from overseas £20.00 buyers £0.00 and 36% from UK
West End City Docklands
investors. Far Eastern investors were notably active in 2012,
£20.00
£0.00 City
Docklands
particularly those from Malaysia and Indonesia.
Central London: Prime Yields and
£0.00 Docklands
£ per sq ft
June 02
£ per sq ft
June 03
June 02
June 04
June 03
June 05
June 04
June 06
June 05
June 07
June 06
June 08
June 07
June 09
%
Dec 03
June 08
June 10
Dec 04
June 09
June 11
Dec 05
June 10
Dec 06
June 11
Dec 07
the Cost of Money 2003-2012
Source: Jones Lang LaSalle/Datastream
The majority of these investors tend to seek long, secure income
streams, although there is evidence that, since supply is so tightly
8%
restricted, their investment criteria may be shifting. This may entail Central London: Prime Yields and
considering more risky opportunities – for example, Central shorter London: leases
the Cost of Money 2002-2011 Q2
Prime Yields and
Source: Jones Lang 6% LaSalle/Datastream
that produce higher yields. Three major Chinese investors the Cost were of Money 2002-2011 Q2
Central London: Prime
Source:
Yields 8%
Jones Lang
and
LaSalle/Datastream
active in the London market in 2012 – COLI, Gingko Tree and CIC.
the Cost of Money 2002-2011 Q2
Interest from China Central has London: increased Prime Yields and 8%
4%
Source: as Jones a result Lang of LaSalle/Datastream
the removal of
the Cost of Money 2002-2011 Q2
6%
regulations preventing funds 8% from investing in property outside their
Source: Jones Lang LaSalle/Datastream
home market. We expect large Chinese insurers 6% to be a feature of
2%
8%
the market in 2013.
4%
4%
0% LIBOR
The London 6% market retains its appeal as a safe haven based West End
2%
on its
5 Year Swap
relatively long leases and political
4%
stability. Prime yields for larger lot
West End 5 Year SwapCity
2%
sizes in the 4% City are under downward pressure from 5.25%, whilst
0% West End 5 Year Swap City
for smaller deals yields have
LIBOR
2% already fallen to 5.0% driven by
competition for safe haven product among Asian 0% and European
5 Year Swap City
LIBOR
2%
UHNWIs. In the core West End, prime yields are between 4.0% and
0% City
LIBOR
4.5%, reaching 5.0% for larger lot sizes in more peripheral markets.
0% LIBOR
%
June 02
June 03
%
June 04
6%
June 02
June 05
June 03
June 06
%
June 04
June 07
June 02
June 05
June 08
%
June 03
June 06
June 09
June 02
June 04
June 07
June 10
June 03
June 05
June 08
June 11
June 04
June 06
June 09
Dec 03
June 05
June 07
June 10
Dec 04
June 06
June 08
June 11
Dec 05
June 07
June 09
Dec 06
June 08
June 10
Dec 07
June 09
June 11
Dec 08
Dec 08
June 10
Dec 09
Dec 09
June 11
Dec 10
Dec 10
Dec 11
Dec 11
Dec 12
West End
“Once again overseas investors
have been the driving force,
accounting for 74% of money
invested.”
Dec 12
West E
5 Year S
City