West End residential Our patch, Our view Q1 2016...four unique flats offering high ceilings, large...

West End residentialOur patch, Our view Q1 2016

2–3

The wider London market remained robust throughout the first quarter of 2016, with Nationwide* reporting annual price growth of 11.5%. This is broadly on a par with the average growth rates seen throughout 2015. Transactions across the capital fell by around 13% in 2015, to around 110,000 sales. However, there were also 26,900 new build units sold; up 19% from 2014. The market is suffering from a lack of stock for sale with RICS reporting the average stock of homes per estate agent as about half of the long-term average. As from April 2016, buy-to-let investors are subject to an additional 3% stamp duty on purchases and, as a result, we expect some volatility in sales in the first part of the year. However, any transitory impact is likely to be ironed out by the end of the year.

On the macro side, the economic fundamentals in the UK look strong and set to continue. This is helping to underpin the housing market. In particular, the labour market continues to perform well, recording the highest employment rate since records began 45 years ago. Inflation has remained close to zero for well over a year, and is likely to remain at this level in the very near term. This will ensure the low interest rate environment is maintained, creating further certainty and stability in the mortgage market which will undoubtedly bolster the London housing market.

Reflecting these factors in the West End both the sales and lettings teams saw a strong and steady first quarter. The sales team agreed £44.2 million worth of property, with units averaging values of £1,680 psf – 3% higher than the same time last year. This strength was echoed through lettings, which agreed £57,258 per week worth of tenancies, 15% higher than the same time in 2015. In addition, current rents in our patch sit at £855 per week, a figure that is 28% higher than last quarter and 21% higher than the same time in 2015.

We hope you enjoy the latest edition of Our Patch, Our View. If you would like any further information please do not hesitate to contact a member of the team, whose details can be found at the back of this report.

Overview

Jamie Gunning Executive Director

T: +44 (0)20 7182 2005 E: [email protected]

West End office

TempleLeicester Square

Covent Garden

Piccadilly Circus

*Source: Nationwide Report, April 2016

4–5

Sales overview

The first quarter of 2016 saw a surge of activity towards the end of March, with savvy buyers keen to beat the implementation of the new stamp duty.

The Midtown team agreed the sale of £44.2 million worth of property in the first quarter of 2016, with units achieving average values of £1,680 psf. This marks a steady start to the year, with annual growth of 3% and average prices of £1,842,438 for properties in our patch. Of this quarter’s sales, 58% came from second hand stock and 42% came from new build, with new build properties conducting a 10% premium over their second hand counterparts. However, in terms of volume, resale units performed very well this quarter – transaction numbers were up 56% when compared with last quarter. In addition, resale capital values are up 38% over Q1 2015 and those for new build units are up 19% over the same time frame.

56%Annual increase in resale unit transactions

Q1 2016 Sales snapshotTotal value of properties sold £44.2m

Average £psf £1,680

Average new build £psf £1,771

Average resale £psf £1,615

Highest £psf £2,359

Average sales value £1,842,438

£ p

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West End values 2009 to present

CBRE Research, Q1 2016

In terms of price distribution, of the units on the market this quarter, 29% of them were in the £1,251–£1,500 psf price bracket; 42% were in the higher price bracket, evenly split between £1,751–£2,000 psf and £2,001–£2,250 psf. Comparatively, in Q1 2015, 56% of all properties on the market fell into the bracket £1,251–£1,500 psf and the upper portions of the market from £1,751 psf upwards only accounted for 23% of properties sold. The highest value sale this quarter sold for £3,850,000 – that equates to £2,125 psf and was achieved at Apartment 8, Berner’s Street, Fitzrovia, W1.

29%Of sales between £1,251– £1,500 psf

Domestic buyers were our primary demographic this quarter, with 55% of all sales being to British buyers. That figure is up from 44% at the same time last year and 27% last quarter. Many of our buyers this quarter work in property, reflecting that people in the know are keen to snap up the high quality units available in this part of London with a view to longer term growth.

55%Sales in Q1 from British buyers

6–7

Case study: 3–4 Great Marlborough Street

3-4 Great Marlborough street is a fantastic boutique development behind a distinctive Victorian façade. CBRE launched the development in Q1 2016 which consists of four unique flats offering high ceilings, large entertainment space and feature fireplaces.

Within the first few weeks of launching the development 50% sold out. Buyers were quick to fall in love with the unique spaces in this excellent and exciting location, the heart of Soho and next to Carnaby Street. The penthouse roof terrace has to be seen to be believed; with its far reaching views of the West End it really does impress.

Prices range from £3,400,000 - £5,800,000

Sales forecast The market in our area has shown significant growth over the last few years, with our number of transactions in Q1 2016 double that achieved at the same time in 2012. However, we are experiencing a slight transition within the market with more negotiation taking place between buyers and vendors than in recent times. So far this year, stock levels have seen slight increases, but we are still wary of the impending shortage of stock that lies ahead of us when Westminster implements its intended changes to the rules surrounding office to residential conversions. As a result, we cannot overstress what a unique opportunity is now available to buyers wishing to purchase a property in an area where residential property is soon to be severely limited.

Price range – Sales Q1 2016Q1 2015

Purchaser origin Q1 2016 Purchaser occupation Q1 2016% Percentage % Percentage

UK 56Italy 10Turkey 10Russia 6Americas 6Malaysia 6Lebanon 6

Property 39Other 23Finance 15Events/Media 15Law 8

Price range (£psf)

% P

erce

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es 50

60

40

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1000-12

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1251

-1500

1501

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-225

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>2250


8–9

Lettings overview

The lettings team agreed £57,258 per week worth of tenancies this quarter – a figure that is 15% higher than the same time last year. Average rents currently sit at £855 per week which is 28% higher than last quarter and 21% higher than the same time in 2015. As might be expected from this growth, average £psf values have increased by 4% over the last year and now sit at £55 psf. The highest rentals this month was at 14 King Street, which achieved £84 psf – 2% higher than the highest value achieve last quarter and 2% higher than the highest achieved this time a year ago. In addition, void periods are down to just 13 days this quarter, further reflecting the high demand for units in our patch.

Q1 2016 Lettings snapshotTotal number of properties let 67

Total rental value of property let* £57,258

Average rental value per week £855

Average size of rental property 802 sq ft

Highest rental value achieved £103 psf

*Based on price per week

The Midtown market continued to perform well over this quarter, with its enviable location and aesthetic offerings as attractive as ever.

Over the last year, we have seen particularly strong growth in the value of one bedroom apartments, with these units increasing in weekly rental values by 27% to £674 per week. Similarly, studio apartments have increased by 24% to £489 per week and two bedroom apartments by 19% to £1,005 per week.

In terms of tenancy, the average period remains high at 52 weeks. The vast majority of our tenants are professionals. Most of these work within the fields of Technology/Media/Telecoms and Finance, with these two sectors accounting for 55% of all tenancies. While student tenancies were not particularly active this quarter, we expect them to increase over the next quarter as many prepare for the new academic year, in line with the usual lettings cycle.

Domestic tenancies accounted for 37% of our tenancies this quarter, followed by 25% from the Americas and 22% from Europe.

28% Annual increase in rental values

£855pwAverage rental values

37%UK tenancies

10–11

Case study: Fitzroy Place

Fitzroy Place comprises 235 luxury private apartments and over 200,000 sq ft of prime office together with shops and five-star community facilities. The exclusive residents’ club provides superlative facilities including 24 hour concierge service, gymnasium, cinema, treatment room and business centre.

Situated in the heart of Fitzrovia, Fitzroy Place is only a few minutes’ walk from Mayfair, Soho and Marylebone and just moments from the luxury shopping amenities of Oxford Street, Regent Street and New Bond Street. Fitzroy Place also benefits from excellent transport links, particularly with Tottenham Court Road only a few minutes’ walk away and is well positioned to become one of London’s most significant prime central London mixed use developments.

We have enjoyed great success in the development with multiple units being pre-let before legal completion – to tenants who were willing to commit to renting units ‘off plan’ which is relatively unheard of in lettings and is more akin to sales. £psf values have peaked at £78 psf compared with our average this quarter of £55 psf and further demonstrates the demand from the market for quality new build apartments with five star amenities on site. Letting off plan and having tenants move in as soon as legal completion occurs means that the client does not suffer from any void period which further adds to the popularity of buying a new build from a rental investor’s point of view.

Lettings forecast Looking forward, we expect demand for rental properties to come from three main sources: corporate relocations, private professional tenants and students in preparation of the beginning of the academic year in September. Both corporate relocations, (where high level executives are moved to London), and private professional tenants, tend to favour new build or recently refurbished developments. As a result we expect new developments to perform particularly well in the coming months.

Price range - Lettings Q1 2016Q1 2015

Tenant origin Q1 2016 Tenant occupation Q1 2016% Percentage % Percentage

UK 37Americas 24Europe 22Asia 12 Middle East 3Africa 2

Tech/Media/Telecoms 38 Finance 18Entertainment 7Government 7Power/Energy 7Law 7Property 7Retail/Fashion 3Student 3Service Apartment 3

Price range (£ per week)

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Despite the fact that many professional landlords will bring their properties to market in anticipation of the student demand that is always generated towards the latter half of the second quarter, several factors will ensure that demand continues to outstrip supply. Firstly, the forecast increase in the number of tenants from the corporate and student market is being met with a continuously high renewal rate – a trend we expect to see continue into the second quarter of the year. As existing tenants remain firmly ensconced, fewer properties will be made available to the market, ultimately constraining supply and feeding price growth.

In summary, we predict an increase in both supply and demand for rental property in the second quarter of 2016. However, demand will continue to outpace supply as high renewal rates create an acute barrier to the number of properties coming back onto the market. It is the interaction of these factors which lead us to predict increased transaction volumes in the second quarter along with a continuation of the positive price trend in overall rental values.

12–13

Property Management

In line with the pattern across the wider lettings market, the vast majority of our properties are occupied by professionals, with this group accounting for 83% of managed properties.

The average rent for a managed property in Q1 2016 was £750 pw, in comparison with £592 pw in Q1 2015 representing a 27% increase. Comparatively, an unmanaged property averages at £709 pw.

These figures reflect both a competitive and buoyant market, with tenancies being agreed well in advance, short turnarounds and rental values on a positive trend.

27%Increase in average rent for a managed property since Q1 2015

14–15

Rachel MasonSurveyor


Scott CabotAssociate Director


Ben KirtleySenior Sales Negotiator


Shaun MacnamaraSales Manager


Jonathan MyersSales Negotiator


Craig SimpsonAssociate Director


Ian ParsonsSales Negotiator


Andrew ChambersAssociate Director


Samuel AstonSales Negotiator


James BurrowsDirector


Sales

Rhonda ColeHead of Property Management


Amy WarringtonSenior Property Manager


Connall O’NeillClient Services Manager

T: +44 (0)20 7420 3031 E: connall.o’[email protected]

Luke MellorLettings Valuer


Vanesha PancalManagement Assistant

T: +44 (0) 20 7420 3004 E: [email protected]

Jennet SiebritsHead of Residential Research


Phillippa DrysdaleAnalyst


To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at: www.cbre.com/researchgateway

CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE. ©2016 CBRE Ltd.

Development Consultancy

James MashiterSenior Surveyor


Lisa HollandsManaging Director


Guy PasseySenior Director


Jamie GunningExecutive Director


David JW SmithDirector


Charlie PhilipDirector


Lettings and Property Management

Research

Client Services

Alie HortonAssociate Director


Mike KnowlesLettings Manager


Emily PooleSenior Lettings Negotiator


Daniella Waterman-CollinsSenior Lettings Negotiator


Lydia MintoLettings Negotiator


Jonathan RogersLettings Negotiator


William PorrittLettings Negotiator


Alex EvagoraLettings Negotiator


West End residential Our patch, Our view Q1 2016...four unique flats offering high ceilings, large...

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