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London’s Midtown Offices Replace West End for Returns

Offices in London’s Midtown produced higher returns for investors than the rest of central London in the first half as planned infrastructure improvements helped lift rents, Investment Property Databank Ltd. and broker Farebrother Ltd. said.

Properties in the area stretching from Farringdon Road to Tottenham Court Road generated a total return of 5.9 percent compared with 5.4 percent in the West End and 4.3 percent in the City of London financial district. Midtown’s total return of 4.8 percent, which includes rents and changes in values, trailed the West End’s 4.9 percent six months ago, though it beat the City’s 3.4 percent return.

Midtown’s diverse tenants, “the relatively low levels of stock and limited development pipeline have combined to make it London’s most compelling investment proposition,” Alastair Hilton, head of investment at Farebrother, said in the statement. The Crossrail train, due to be open in 2018, and improvements to the existing Thameslink railway will make Midtown “one of the most accessible places in the U.K.,” he said.

Tenants are looking beyond more traditional districts for offices as transport links to the west of the City of London improve and space becomes increasingly limited in the West End.

Blackstone Group LP (BX) is among investors in the district, buying The Adelphi Building for 265 million pounds ($426 million) and Lacon House for 90 million pounds, according to the report. The value of all transactions in Midtown fell to 1.1 billion pounds in the period from 1.4 billion pounds a year earlier.

Overseas investors were involved in 71 percent of the transactions during the period, according to the report. Far eastern investors accounted for 17 percent of deals, according to the report.

Editors:

To contact the reporter on this story: Patrick Gower in London at pgower@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net

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