Some £722 million of development land sales in London were completed in the second quarter of the year, a substantial increase of 48% on the previous quarter, new research shows.
It is the strongest quarter of sales since the vote to leave the European Union in June 2016 and indicates that investors, including those from overseas, are in the market and this is expected to continue, according to the report from real estate advisors CBRE.
The analysis report reveals that three deals in the second quarter were above £100 compared with none in the first quarter of the year. It suggests that political uncertainty acted as a drag on development land sales during 2016, but the rebound in activity during the first half of this year demonstrates the re-emerging appetite for development land in London.
The two most significant deals of the quarter were similar in nature, both were over £150 million and involve sites for mixed use development in Southbank. The first site, in the Vauxhall, Nine Elms and Battersea opportunity area was purchased by Chinese developer R&F properties for a residential led mixed-use development.
This follows the company’s purchase of Queens Square Croydon in the first quarter for £59 million, another residential led development opportunity. The second site, One Waterloo, was purchased by the developer HB Reavis with planning permission for a 950,000 square foot speculative office led mixed use development.
Looking forward, the report says that the sales pipeline remains strong, with a substantial amount of land either under offer or exchanged. At the end of the second quarter it is estimated there is another £1.5 billion in the pipeline, significantly higher than the £602 million estimated at the end of 2016.
The sale of New Covent Garden Market, which recently exchanged contracts to Chinese conglomerate and property developer Dalian Wanda for £500 million, is expected to help define this year’s market when it completes.
As with the first three months of the year, almost all the land purchased in the second quarter is intended for mixed-use development, both office and residential, with many located in areas earmarked for large scale regeneration.
‘It also reflects greater caution in current market conditions, with developers looking for opportunities in a diverse range of sectors rather than focusing on one area in particular,’ the report says.
‘Looking forward, we expect land sales across London to remain above average for the remainder of 2017. Overseas investors will continue to take advantage of current market conditions whilst also capitalising on the current exchange rate,’ it points out.
‘Both international and domestic developers are seeking sites in central London, particularly in the West End where lot sizes are typically smaller, but supply is markedly constrained,’ it concludes.
