PROPERTYꢀ MARKETS REVIEW July 2019

Chestertons Monthly PROPERTYꢀ MARKETS REVIEW July 2019

chestertons.com

1 CONTENTS

Economic Overview 01

Residential property 03 National sales 03 London sales 06 New homes 08 National lettings 09 London lettings 10

Commercial property 11 London oﬃce market 11 Retail market 12

Investment market 13 Residential 13 Commercial 15

Contact 16

Nicholas Barnes – Head of Research “Welcome to our latest monthly review of national and London residential and commercial property markets.”

2 ECONOMIC OVERVIEW

GDP Growth UK GDP growth stood at 0.3% in the three months to May, pushes CPI inflation below the 2% target and job growth the same rate as that recorded in the previous rolling three remains strong, with services firms reporting in June that month period. UK output has proved surprisingly resilient employment rose at the fastest rate since August 2017. since the vote to leave the EU, with record employment With the new Prime Minister now in post, attention will andꢀwage rises largely outpacing inflation. no doubt once again focus increasingly on Brexit. Boris However, the final IHS Markit/CIPS Purchasing Managers’ Johnson has stated publicly that he is prepared to walk Index (PMI) reading for June suggests that the economy away without a deal which the Bank of England governor will have contracted by 0.1% between April and June. hinted would likely be followed by a cut in Bank Rate. Output in the construction sectorꢀwas found to have fallen A no-deal would also likely trigger falls on the stock at its steepest rate since April 2009 in June whileꢀUK marketꢀand aꢀdrop in the pound. factories suffered their worst monthly decline in six years. In its July projections, the Treasury’s forecasting panel On the positive side, growth in real household incomes lowered its GDP growth outlook for 2019 to 1.3% but looks set to pick up, as the recent fall in energy prices heldꢀits 2020 forecast at 1.4%.

Figure 1: UK GDP growth outlook

2.5%

1.5% 1.7% 1.7% 1.8% 1% 1.4% 1.3% 1.4% 0.5%

0% 2018 2019 2020 2021 2022 2023

Source: ONS; HM Treasury Forecast Panel

1 Inflation & interest rates CPI inflation remained at 2.0% in the year to June, while Bank Rate was held at 0.75% at the June meeting of the RPI inflation fell from 3.0% to 2.9%. The 2019 forecasts Bank of England’s Monetary Policy Committee. UK 3 month forꢀboth CPI and RPI from the Treasury’s forecast panel are Libor rates have come down again this month and as at unchanged at, respectively, 1.8% and 2.5%. The forecasts for 23rd July stood at 0.76%. 5 year swap rates have also 2020 have also been held at, respectively, 2.1% and 2.9%. dropped and stood at 0.70% at the same date.

Figure 2: Inﬂation & Bank Rate forecasts

3.5% 3.1% 3% 2.9% 3.0% 3.0% 2.7% 2.5% 2.5% 2.1% 2.1% 2% 1.8% 1.9% 1.9% 2.0% 1.64% 1.86% 1.5% 1.45% 1.0% 1% 0.75% 0.75% 0.5%

0% 2018 2019 2020 2021 2022 2023

Bank Rate (Q4) CPI RPI Source: HM Treasury Forecast Panel & ONS

Employment and earnings growth The latest UK employment rate was 76.0%, and includes 3.4% (including bonuses) and 3.6% (excluding bonuses). the ﬁrst quarterly decrease recorded since the period June In real terms, total pay (including bonuses) is estimated to August 2018. The unemployment rate was unchanged at to have increased by 1.4% compared with a year earlier, 3.8%, the lowest since the three months to December 1974. and regular pay (excluding bonuses) is estimated to have increased by 1.7%. Regular pay is now growing Wages growth rose to 3.6% in the year to May 2019, at its fastestꢀrate for nearly 11 years in cash terms and theꢀhighest growth rate since April-June 2008. Estimated its quickestꢀfor over three years after taking account of annual growth in average weekly earnings increased to inﬂation, according to the ONS.

2 RESIDENTIAL PROPERTY

National sales market The RICS June survey reported that interest from buyers was even more dramatic: -25.1% in the UK and -24.1% in increased for the ﬁrst time since the EU Referendum three England. However, comparing the ﬁrst half of 2019 with years ago. However, this has not yet translated into an that of 2018 the fall is a more modest 4.6% across the UK increase in sales. HMRC reports that monthly transaction and 5.0% in England, although this equates to just over numbers across the UK fell by 13.6% in June and by 25,000ꢀfewer properties being sold in the UK. 12.9% in England. Compared to June last year, the fall

Figure 3: Monthly residential property transactions (non-seasonally adjusted)

140,000

120,000

100,000

80,000

60,000

40,000

20,000

0 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19

UK England Source: HMRC

Annual UK house price growth slowed to 1.2% in May, according to Hometrack, whereas Londoners need £84,000 down from 1.5% in the previous month, according to the a year. First-time buyers need to earn more now than Land Registry. The average UK house price now stands at three years ago in most cities, with the exception of the £229,431. A similar pattern was recorded in England, where most expensive areas where buying is now marginally prices in the year to May slowed to 1.0% compared to 1.3% more aﬀordable. The average house price in the 20 cities in the previous month, taking the average price to £245,817. monitored by Hometrack is now £256,200, up 1.8% on a The average ﬁrst-time buyer needs a household income year ago. of £54,400 to get on the property ladder in British cities

3 Figure 4: Average annual house price growth: UK & England

0% May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19

UK England Source: Land Registry/ONS

According to the Land Registry, 12 month regional house West Midlands (2.7%). Two regions recorded price falls in the price growth is strongest in the North West (3.4%) and the year to May – London (-4.4%) and the North East (-0.7%).

Figure 5: Average regional house price & annual price growth (May 2019)

£500,000 5%

£450,000 3.4% 3.75% £400,000 2.6% 2.5% £350,000 2.7% 1.9% 1.0% £300,000 1.25% 0.6% 0.4% £200,000 0%

£250,000 -0.7% -1.25% £150,000 -2.5% £100,000 -3.75% £50,000 -4.4%

0 -5% North West South Yorks & East of South East North London West Midlands West Humber England East Midlands East

Avg prices 12 months growth Source: Land Registry

Rightmove reports that the asking price of property coming market, but the time taken to secure a buyer is at its longest to market fell by 0.2% in July, the ﬁrst monthly fall so far at this time of year for six years. As a result, the average in 2019. At regional level, the strongest growth in annual stock per estate agent branch is at its highest level since asking prices was in the North West (2.5%) while in London July 2015. asking prices fell by 1.7%. Less property is coming onto the

4 Figure 6: Monthly change in average asking prices

1.0% 1.1% 0.9% 1% 0.7% 0.4% 0.3% 0% -0.1% 0.7% 0.4% -0.2% -1% -1.7% -1.5% -2% -2.3% -3% Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19

Source: Rightmove

Mortgage approvals for house purchase rose in May for both approvals were just 0.5% higher while approvals for movers ﬁrst time buyers (FTBs) and home movers – by respectively, were lower by 1.2%. 11.3% and 14.3%. Compared to May last year, FTB loan

Figure 7: Mortgage approvals

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19

First time buyers Home movers Source: UK Finance

5 The Bank of Mum & Dad (Bomad) is set to become the The Government is already consulting on a major reform 11thꢀlargest financial lender in the UK this year, according of the current leasehold system of residential property to Legal & General. 62% of aspiring home owners under the ownership. The former, Secretary of State for Housing, age of 35 are now reliant on parental support to finance Communities & Local Government James Brokenshire their first home move and the research forecasts that one hasꢀconfirmed some of the measures which will be taken: in five house purchases in 2019 will be made with money – all new houses are to be sold on a freehold basis unless from parents or grandparents. thereꢀare exceptional circumstances The average amount parents or grandparents contribute – all ground rents on new leases will be reduced to £0 to home purchases is forecast to rise by one third this year – freeholders and managing agents will have to provide to reach £24,000. Total lending by Bomad is expected to relevantꢀinformation regarding the sale of leasehold propertiesꢀto prospective purchasers within 15 working increase from £5.7 billion in 2018 to £6.3 billion this year daysꢀand charge aꢀmaximum fee of £200 despite the fact the number of property purchases being – where buyers are incorrectly sold a leasehold home consumers funded by parents and grandparents is forecast to fall by will be able to obtain their freehold outright at no extra cost nearly 20%.

London sales market The decline in London house prices has accelerated quarter) and aﬀordability issues. Preliminary data from according to the latest Land Registry index. In the year theꢀLand Registry suggest that transaction numbers in to May, average prices fell by 4.4% compared to a 1.7% theꢀﬁrst half of the year will be around 16% lower than drop in the previous month. The average house price in inꢀthe corresponding period in 2018. London now stands at £457,471. Although Brexit concern Nonetheless, buyer interest has picked up with the RICS faded somewhat into the background with the extension reporting that new enquiries during the second quarter of the UK’s leaving date, the sales market continues to were up on the three month average. Prospective buyers beꢀhampered by a shortage of properties available to buy have been attracted by falling prices while “necessity (the RICS reported that the number of available properties buyers” are unable to put plans on hold when a change was below the long run average throughout the second inꢀpersonal circumstances dictates immediate action.

Figure 8: Annual price growth in Greater London

1.5% 0.9% 0.2% -0.5% -1.1% -1.8% -2.4% -3.1% -3.7% -4.4% -5.0% May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19

Source: Land Registry

On an annual measure, prices are now falling in all bar seven which compares favourably to the average 0.6% monthly fall boroughs with Barnet (-9.6%) recording the steepest decline. for July over the previous ﬁve years. A signiﬁcant drop in the The strongest growth was recorded in Haringey at 6.1% in number of properties coming to market - the number of new the year to May. Rightmove reports that the price of property sellers was down 18% on the same period a year ago – is coming to market in Greater London fell by 0.2% in July, helping to balance supply with demand and underpin prices.

6 Figure 9: Annual price growth by London borough (May 2019)

Haringey Hackney Newham Barking & Dagenham Hounslow Waltham Forest Brent Redbridge Bexley Westminster Hillingdon Camden Greenwich Lewisham Enꢀeld Richmond Bromley Merton Sutton Ealing Kensington & Chelsea Hammersmith & Fulham Havering Lambeth Wandsworth Croydon Tower Hamlets Harrow Islington Kingston Southwark City of London Barnet -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% Source: Land Registry

Pent-up demand is being released in the prime locations in higher value locations. At the end of June, the Chestertons central London, with foreign buyers additionally attracted Index revealed that average prices were just 0.3% lower by the continuing weakness of the pound which reached a than at the end of March. Average prices fell by 3.9% in 28 month low against the US dollar in July. However, while theꢀyear to end-June compared to a 12 month fall of applicant registrations and viewings are buoyant, this has 4.7%ꢀat the end of March. not yet translated into a similar level of transactions as The gap between buyer and seller expectations has buyers remain very selective in terms of quality, location narrowed and the number of price reductions recorded by and perceived value for money. Chestertons in Q2 fell by around one third compared to the The period April-Jun 2019 saw a 10.3% reduction in sales previous quarter. Despite this, Lonres reported an average compared to the same three months last year according discount on initial asking price of 8.7% over the period and toꢀLonres. Nonetheless, buyers were very keen to act on although availability in early July was 12% down on the theꢀmost sought after properties and the limited supply corresponding point in 2018, 46% of available stock had often triggered multiple bids. been reduced in price. The combination of limited availability and strong buyer demand has brought about a ﬂattening of prices in the

7 New homes market The new homes market across Greater London continued a slight reduction in numbers (but not percentage) to struggle in the second quarter. Sales were 8% down on compared to Q1 and the percentage is also higher than at the previous quarter and 6.1% lower than in same quarter the corresponding point last year (47%). A further 2,646 last year. Sales in the ﬁrst half of the year were a sizeable completed units were also unsold, which is also a slight 14.6% lower than in the corresponding period in 2018. reduction on the previous quarter-end ﬁgure, but again higher than at the same point in 2018 (1,554). At the end of June 2019, a total of 64,000 new homes were under construction, 48% of which were unsold,

Figure 10: London residential starts, completions & sales: Q2 2014 – Q2 2019

10,000

7,500

5,000

2,500

Starts Completions Sales Source: Moilor

The slower sales market is causing developers to either Anecdotal evidence suggests that those schemes that have reduce pipelines or, in some cases, mothball projects sold well have reduced prices to a level which is much closer already underway. Construction starts in the first half of the to nearby comparable second hand stock. Although asking year were 35% down on the corresponding period last year, prices during Q2 were broadly stable, achieved prices were although completions were only around 1% lower. There is lower. Discounts of 5%-10% are anecdotally common while also a greater willingness to sell blocks of developments or some penthouses in central London have reportedly been entire schemes to investors and “Hold to Rent” has become offered at discounts of up to 30%. more common. This involves developers who don’t need to sell immediately instead renting significant numbers of units, typically pepper potted amongst flats sold or for sale.

8 National lettings market Average rents rose by 1.8% in the year to June, according the UK regions covered in the research, with the South West to Homelet, a slight acceleration compared to the previous (4.5%) the strongest performer among English regions. The month. The average monthly rent now stands at £941 per shortage of available stock remains an issue and the RICS calendar month and £781 (also up 1.7% compared to June reported that the supply of rental homes recorded in their last year) when London is excluded. Rents rose in all 12 of June survey dropped for the 20th month in a row.

Figure 11: Average monthly asking rents & annual growth by region (June 2019)

£1800 5%

4.5% £1600

£1400 3.75%

£1200

£1000 2.5% £800 2.1% 2.0% 2.0% £600

£400 1.25% 0.9% 0.8% 0.9% £200 0.2% 0.2% £0 0% South East South North West Greater Yorks & East Of North West Midlands East West Midlands London Humber England East

Source: Homelet Ave rent 12 month growth (%)

Data from HomeLet suggests that the Tenant Fees Act may inꢀScotland, Wales and Northern Ireland. It claims that be causing more movement amongst tenants. The firm says poorꢀquality housing is responsible for a high proportion that the average duration of a tenancy has reduced to 30.7 ofꢀdeaths, injuries and chronic illnesses and the PRS has months, down from 32.1 months a year ago.ꢀWhilst this isn’t aꢀhigher proportion of substandard housing. a significant reduction, the drop does coincide with the The rationale behind the move is that a national register introduction of the Tenants Fee Act in England and could be would aid the identification of rogue landlords who operate a very early indication of more mobility amongst tenants. across different areas and prevent them from managing any In a drive to improve conditions in the private rented sector properties going forward. In addition, tenants would be able (PRS), the Chartered Institute of Environmental Health has to check whether the property they are planning to rent is called for a new national mandatory landlord registration registered, thus helping them to make a better decision scheme for England, mirroring those already in operation whenꢀchoosing a property to rent.

9 London lettings market Tenant demand across the Greater London market mortgage debt and who have not incorporated their continues to be frustrated by low supply and high rents. portfolios, have sold properties, often to owner occupiers The full impact of the Tenant Fees Act, introduced at the and thereby reducing overall supply levels. In spite of supply beginning of June, is yet to be seen however, this will only constraints, annual rental growth in Greater London slowed add to the growing regulatory and ﬁnancial burden being again in June, to just 0.9% compared to 2.8% in March placed on buy-to-let landlords. Survey evidence suggests 2019, according to Homelet. that more smaller landlords, especially those who have

Figure 12: London borough monthly asking rents for 2-bed ﬂats (as at 22 July 2019)

City of London Westminster Kensington & Chelsea Camden Hammersmith & Fulham Wandsworth Islington Southwark Hackney Tower Hamlets Lambeth Merton Richmond Hounslow Haringey Newham Ealing Greenwich Barnet Brent Lewisham Kingston Harrow Waltham Forest Enﬁeld Redbridge Bromley Hillingdon Croydon Sutton Barking & Dagenham Havering Bexley

£0 £1,000 £2,000 £3,000 £4,000 £5,000 £6,000 Source: Zoopla

Tenant demand remained firm in the higher value locations Robust tenant demand in the higher value locations in the three months to June. Chestertons recorded a 17% resulted in further slight improvement in rental increase in new tenant registrations compared to the performance, although Lonres reports that there was previous three month period, while offers were 10.5% stillꢀaꢀ2.4% discount on asking rents during the quarter. higher. However, actual lettings numbers were 0.8% down TheꢀChestertons Rental Index recorded 0.9% growth in the on the first quarter according to Lonres despite available year to end-June 2019, while quarterly growth accelerated stock having risen by just over 4% in early July compared to 1.1%, up from 0.5% recorded in the previous quarter. toꢀthe same point in 2018, which may be partly explained Rents rose in all but three of the locations covered in our by tenants waiting until the introduction of the Tenant index, with the strongest growth recorded in Kentish Town Fees’ꢀAct before committing to deals. (4.5%) and Canary Wharf (4.1%).

10 COMMERCIAL PROPERTY

London office market Central London office take-up rose in Q2 compared to Q1 availability across central London stood at 5.7%, ranging but was down on the corresponding period in 2018. Pre-lets from 8.0% in Docklands to 4.1% in the West End. and flexible space accounted for the major proportion Grade A rents in the City currently stand at £60-£75/sq ft ofꢀtake-up. The largest deal was the European Bank for p.a. with typical rent-free periods averaging 24 months Reconstruction & Development’s 365,000 sq ft pre-lease onꢀaꢀ10 year lease. West End grade A rents are between atꢀ1-5 Bank Street in Canary Wharf with occupation £110-£120/sq ft p.a. with rent-free periods of 21-24 months. scheduled for 2022. The move is seen as a significant commitment to London as a global financial centre Interesting news comes from Microsoft which has andꢀshows the importance of London as a location apparently shrunk its office footprint by up to 30% in some forꢀinternational businesses.ꢀ instances through the use of sensors which show actual space utilisation. It will be interesting to see how this may Further evidence of London’s continuing pulling power affect market-wide demand for office space going forward. comes from Deutsche Bank’s confirmation that it will stillꢀmove into a new 469,000 sq ft City of London Meanwhile, Brexit uncertainty is driving more of the UK’s headquarters in 2023, in spite of a massive restructuring small businesses to look for shorter office leases, according that will see it cut 18,000 jobs across the world. toꢀnew figures from the Citibase Business Confidence Index. As part of their Brexit preparations, 72% of the small and Central London availability continued to fall during the medium-sized enterprises surveyed say they are de-risking quarter to reach its lowest level since 2016, thanks largely by looking for leases of less than three years. This is 15 toꢀstrong pre-letting activity. Over 60% of space under percentage points higher than at the start of 2017. construction at quarter end had been pre-let. At quarter-end,

11 Retail market The ONS reports that in the three months to June 2019, Shopping centre footfall declined by 2.4% although retail retail sales volume rose by 3.8% compared to Q2 last year parks bucked the trend with footfall increasing by 0.1%. and sales value increased by 3.7%. However, the latest More than 20,000 shops have ‘disappeared’ according to BRC-KPMG Retail Sales Monitor reveals that total monthly Government data analysed by the Altus Group. Between sales decreased by 1.3% in June, compared to an increase 2010 and 2019, some 20,143 shops in England and of 2.3% in June 2018, making it the worst June on record. Walesꢀliable for business rates were converted into homes, Internet sales also suffered, with the ONS reporting that restaurants and cafes or have been demolished. Over the online sales as a proportion of all retailing fell to 18.9% same period, 14,314 ‘new’ stores came onto the Local inꢀJune, from the 19.3% reported in May. Recent research Rating Lists, meaning the overall number of shops has from CACI suggests that there are some drawbacks to fallen by 5,829. having an online-only approach. Retailers that do not The total number of shops in England and Wales has fallen maintain a bricks-and-mortar store in a catchment area from 430,360 on April 1 2010 to 424,531 today and the alongside a transactional website typically experienced Centre for Retail Research estimates that within the next 50% fewer online sales compared to those that do have five years, the overall number of shops will fall even further aꢀphysical presence. The key to the enhanced performance by 8,500 to around 416,000. The numbers do not include is the role stores play in influencing purchasing decisions, those shops which are currently vacant and available to let. with over 50% of online spend touching a physical store. This is achieved through click-and-collect, in-store ordering The national town centre vacancy rate climbed to a four or via the store’s role as a showroom to “try before you buy”, year high of 10.2% in April according to the British Retail with purchases made later online at the consumer’s Consortium vacancies monitor, putting the number of convenience. Amazon and Alibaba have already embraced empty shops at 43,302. Meanwhile, following a recent the omni-channel approach which is good news for the Freedom of Information (FOI) request sent to local councils ailing bricks & mortar retail sector, even if their pricing across the UK, corporate restructuring specialist Duff & policy isn’t. Phelps has calculated that 15.9% of all shops and retail outlets in the country now lie empty, the difference Footfall has also suffered. According to the latest beingꢀthey include units which are not available to let. BRC-Springboard Footfall & Vacancies Monitor, footfall declined by 2.9% in June. High streets were the worst Prime retail rents in the West End are currently between affected shopping hubs, with footfall sliding by 4.5%. £2,250-£2,500/sq/ft (Zone A).

12 INVESTMENT MARKET

Residential In spite of increasing financial and regulatory pressures nearly 8% in May, while re-mortgage activity was just over on buy-to-let (BTL) landlords, and rising numbers of BTL 4% higher. In the first five months of this year, however, properties being sold, May mortgage data show that many loans for purchase were 4.1% down on the same period in landlords are still prepared buy rental properties. UK Finance 2018 while re-mortgaging was virtually the same (+0.3%). data shows that new BTL loans for house purchase rose by

Figure 13: BTL Mortgage Lending (number of loans approved)

18,000 16,200 14,400 12,600 10,800 9,000 7,200 5,400 3,600 1,800 0 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19

House purchase Remortgage Source: UK Finance

BTL investors are also being attracted by higher yields and, portfolios by a third while just 19% said they were looking in London, sale prices which are falling in most locations. to sell. Interestingly, 40% stated that Brexit was their top A recent survey conducted by Cambridge & Counties concern for the property sector, followed by rising interest Bank revealed that 13% of landlords claimed to be rates (32%), a lack of conﬁdence in the stability of lenders veryꢀoptimistic in terms of investment growth and yields. (32%)ꢀand rising levels of tax (32%). 19% of respondents said they were looking to grow their

13 Figure 14: gross initial yields for 2-bed ﬂats (at 22 July 2019)

Barking & Dagenham Bexley Redbridge Sutton Havering Merton Croydon Newham Hounslow Lewisham Westminster Hammersmith & Fulham Harrowꢀ Kingston Enﬁeld Brent Ealing Greenwich Hillingdon Waltham Forest Bromley Tower Hamlets Wandsworth Camden Islington Barnet Richmond City of London Haringey Kensington & Chelsea Southwark Hackney Lambeth 0% 1% 2% 3% 4% 5% 6%

Source: Zoopla & Chestertons Research

If the mayor of London has his way though, he may investment in the build-to-rent (BTR) sector this year. Recent driveꢀmore landlords out of the sector. He has called on the major announcements include: government to give him extra powers so that he can apply – Unibail-Rodamco-Westfield has started work on the £670m rental caps in the capital to combat rising unaffordability Cherry Park residential development next to its shopping for tenants. Average monthly private rents in London have centre in Stratford, east London. When completed in 2023, increased by 35% from £1,095 in 2011 to £1,473 in 2018, Cherry Park will be one of London’s largest single-site BTR according toꢀanalysis by the Valuation Office Agency and developments with more than 1,200 homes. private renters spend 42% of their household income on – Greystar has teamed up with Henderson Park to complete theꢀ£101m acquisition of the former Royal Mail depot in rent, compared with 30% spent by those living elsewhere NineꢀElms and will now develop an 894-home build-to-rent inꢀEngland, according toꢀthe latest English Housing Survey. scheme on the site. According to research from Kent Reliance, the value of the – Shopping centre REIT Intu has unveiled plans to build 1,000 private rented sector fell by £22bn in the first quarter of this BTR homes at its Lakeside shopping centre in Essex. year. In contrast, various estimates point to an increase in

14 Commercial A combination of a shortage of opportunities of suitable Major recent deals include: quality and Brexit concern has seen national property – Orion Capital Managers has finalised the deal to buy BT’s investment volumes drop in the first half of 2019. The 300,000 sq ft headquarters building in the City for £209.6m. estimated fall in London could be around one third The deal includes a leaseback agreement, which will allow BT compared to last year. There are still interested buyers to remain in the building for 30 months ahead of its move to andꢀforeign investors can benefit from the weak pound aꢀnew headquarters. butꢀinvestors have become more selective. – The UK’s largest mutual life, pensions and investment company, Stamford Land, and Hong Kong’s Hengli are Yields have also risen from last year: prime City office yields reportedly among parties who have submitted second round are currently between 4.25%-4.50%, compared to 4.00%- bids for Mitsubishi Estate’s 8 Finsbury Circus in the City of 4.25% at the same point last year. Prime West End yields London. The 160,000 sq ft building, is being marketed at stand at 3.50%-3.75%, up from 3.25%-3.50% last year. anꢀasking price of £260m which would reflect a yield of 4% ifꢀachieved.

15 Hampstead Kentish Town

Camden & Primrose Hill Islington St. John’s Wood Little Venice

Hyde Park & Marylebone Covent Garden Notting Hill Mayfair Kensington Tower Bridge Canary Wharf Knightsbridge & Belgravia Chiswick South Kensington Chelsea Westminster & Pimlico Earls Court Greenwich & Blackheath Battersea Park Kew Barnes Fulham Parsons Green East Sheen Battersea & Clapham Putney Richmond Wandsworth

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 2019.