Montello Real Estate Opportunity Fund Institutional June Factsheet
GVA Research - Who owns Mayfair and St James's
1. Who owns
Mayfair and
St James’s?
Research
Spring 2015
08449 02 03 04
gva.co.uk
Executive Summary
• Over the last decade there has been £17.7 billion
of investment transacted across the core West End
markets. Activity has been driven by substantial
overseas investment, totalling £11.8 billion between
2005 and 2014, 67% of total investment in the
area. This trend has been even more pronounced
in the last two years, making up 82% of all
investment during 2013 and 2014.
• This activity over the last ten years means
that overseas ownership of freeholds totals 4.2
million sq ft, or 33% of the 12.7 million sq ft over
20,000 sq ft. This increases to 4.6 million sq ft of
buildings when taking into account overseas
owner occupiers.
• The top five landlords are The Crown Estate,
Grosvenor, Berkeley Square Estate, Sateria
Investments and The Pollen Estate who, together
are in possession of 57% of the freehold market.
• The majority of freehold ownership is still under the
control of the landed estates who own 120 of the
251 buildings. These 120 buildings make up 6.1
million sq ft, and 48% of the total core stock and
are deemed to be ‘locked away’ and unlikely to
be sold.
• However, it is no longer only landed estates who
are holding buildings indefinitely. We believe that
of the 251 commercial properties over 20,000 sq ft
counted in our analysis, 160 (71% of stock) will not
see a sale of the freehold in the foreseeable
future, and are destined to be locked away as
assets. This leaves just 91 potentially tradable
buildings, or a meagre 3.7 million sq ft of potential
investment supply.
2. Over the last decade there has
been £17.7 billion transacted across
the core West End markets of Mayfair
and St James’s.
More recently, 2013 saw record investment with £3.4 billion of
investment during the year. Whilst 2014 saw substantial activity
and measured the second highest investment volume in the last
ten years, we believe that the market was constrained by the
lack of available investment supply. This is borne out by volumes
being 40% down on 2013 and in line with 2012 figures. In a central
London context, 2013 was also a record year with £18.7 billion
transacted, with 2014 seeing a 10% reduction on these levels
despite being 26% up on the 10 year average.
Investment activity during the past decade across central
London has been driven by substantial overseas investment. This
is a trend which has been seen in the core West End markets
as much as anywhere else. Across Mayfair and St James’s,
overseas investment totalled £11.8 billion between 2005 and
2014, 67% of total investment in the area. This trend has been
even more pronounced in the last two years, making up 82% of
all investment during 2013 and 2014. 9 out of the 10 largest deals
of 2014 were overseas investments including Norges’ investment
in The Pollen Estate and PonteGadea’s acquisition of 6 St James’s
Square, on which GVA advised.
With overseas investors dominating, it is no surprise that other
buyers have struggled to compete, often being priced out of
investment opportunities. 2006 was the exceptional year, when
institutional investors and UK property companies drove the
market in what was a relatively quiet year, making up 45% and
32% respectively of the £1.4 billion transacted.
UK property companies have been the second largest buyer in
the period since 2005, accounting for £2.5 billion of value, just
14% of the market, with institutional investors making up a lowly
10% of investment.
Who’s selling?
Overseas investors were also the largest vendor by value,
responsible for selling £5.9 billion worth of the transacted stock
since 2005, equating to 33% of the value of the market, although
it is worth pointing out that in many cases they were selling to
other overseas investors.
Institutional investors were the second largest source of sales,
selling £4.9 billion of assets, with UK property companies selling
£4.2 billion worth of stock. These vendors accounted for 28% and
24% of the market respectively. During 2014, institutional investors
were the most active vendors of stock, selling £674 million and
32% of the total for the year. Otherwise, dis-investment was widely
shared. Private investors and overseas investors made up 19%
each of the sales for 2014, with owner occupiers and UK property
companies making up c.15% each.
Who’s buying?
We believe that a profound shift is
occurring in the core West End markets of
Mayfair and St James’s. We have analysed
the ownership of every office and retail
property in the core markets of Mayfair
and St James’s in excess of 20,000 sq ft,
a total of 12.7 million sq ft, to provide a
detailed picture of the areas. Our report
sets this against ownership structures, and the external factors
that are affecting the market.
In a market traditionally dominated by landed estates, more
recently we have seen substantial activity on the part of
overseas purchasers, and the dawn of a new type of investor
who sees property investment in the core West End as a ‘safe
haven’ for their capital. The rationale of these investors is to
to hold onto their investment assets for generations to come,
behaving in many ways like a traditional landed estate.
These investors are likely to ‘lock away’ their assets, thereby
diminishing potential commercial investment supply in these
core markets.
This is putting a downward pressure on the availability of
investment stock. This report will look at the ownership structure
of the commercial property stock in Mayfair and St James’s,
the prevalence of overseas investment, and what this means
for the future.
Justin James, Senior Director, West End Investment
justin.james@gva.co.uk | 020 7911 2678
Overseas investment
Overseas institutional 4%
Landed estate 48%
Unknown 1%
UK prop co 6%
UK Institutional 5%
Overseas owner occupier 4%
Overseas prop co 5%
Overseas private 23%
2005 2006 20082007 2009 2010 2011
£million
2012 2013 2014
2005 2006 20082007 2009 2010 2011 2012 2013 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
70%
100%
Domestic investment
UK owner occupier 3%
Rest of Europe 12%
UK (incl. Landed estates) 63%
Other 3%
Far East 3%
Middle East 15%
North America 4%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Mayfair and St James’s investment 2005-2014 (£ million)
Source: GVA, PropertyData
Overseas investment
2005 2006 20082007 2009 2010 2011
£million
2012 2013 2014
2005 2006 20082007 2009 2010 2011 2012 2013 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
70%
100%
Domestic investment
Rest of Europe 12%
UK (incl. Landed estates) 63%
Far East 3%
Middle East 15%
North America 4%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Mayfair and St James’s investment by purchaser type
2005-2014 (%)
Source: GVA, PropertyData
2 I gva.co.uk/research
3. We have identified 251 commercial properties over 20,000 sq ft
across the core West End markets. Of these, 72 properties have a
‘controlling’ long leasehold interest and our analysis has assumed
that ownership in these cases rests with the long leaseholder.
Who owns…the freeholds?
The majority of freehold ownership is still under the control of
the landed estates who own 120 of the 251 buildings. These 120
buildings make up 6.1 million sq ft, and 48% of the total core stock.
The activity of overseas investors in the market over the last ten
years means that overseas ownership totals 4.2 million sq ft, or
33% of the market. This increases to 4.7 million sq ft (37% of the
market) when taking into account overseas owner occupiers.
23% is overseas private money, with overseas institutional and
property companies totalling an additional 10%. UK institutional
investors and UK property companies own freeholds totalling only
0.7 million sq ft each. Excluding landed estates, UK ownership
totals 1.5 million sq ft, and 11% of the market. This increases to
1.9 million sq ft and 15% taking into account owner occupiers.
Due to the dominance of the landed estates 63% of the market is
in theory in UK ownership. However, in reality overseas investment
is likely to be greater with one example being Norges’ part
ownership of the Pollen Estate. Middle Eastern investors are the
largest overseas freeholders, owning 1.8 million sq ft. European
ownership accounts for 1.6 million sq ft of freeholds.
The top five landlords are The Crown Estate, Grosvenor, Berkeley
Square Estate, Sateria Investments and The Pollen Estate who,
together are in possession of 57% of the freehold market.
The market is dominated by buildings under 50,000 sq ft, with
173 buildings in our analysis. By comparison, there are just 18
buildings over 100,000 sq ft. Of these 18 buildings, 8 are owned
by landed estates, with 8 owned by overseas private investors
and 2 by owner occupiers. These 18 buildings make up 24% of
the total stock.
Who owns…the long leaseholds?
Whilst 68% (8.7 million sq ft) of the stock is owned purely on a
freehold only basis, long leaseholds are held on the remaining
72 buildings, totalling 4 million sq ft of the remaining stock.
Overseas private investors are the largest investor type, owning
1.1 million sq ft on a long leasehold interest. Institutional investors
own 0.9 million sq ft, with overseas property companies owning
0.8 million sq ft.
Who is currently in control?
We have also taken into consideration leaseholds to assess who
controls a particular building. On this basis, the ownership picture
looks very different, with overseas investors owning 6.9 million sq ft
and 55% of the market. Private overseas investors have control of
the largest share of the market, owning 4.1 million sq ft and 32%
of stock. Landed estates’ share of the area reduces from 48% of
freehold ownership to 16%.
This highlights how much stock the landed estates have sold on
a long leasehold, and paints a more accurate depiction of the
current investment picture.
Taking into consideration current ownership, UK owners control
45% of Mayfair and St James’s, with other European investors
owning an additional 17% of the stock, compared to 63% of
freeholds. Middle Eastern investors are in control of 20% of
the market.
Who owns…?
Overseas institutional 4%
Landed estate 48%
Unknown 1%
UK prop co 6%
UK Institutional 5%
Overseas owner occupier 4%
Overseas prop co 5%
Overseas private 23%
2005 2006 20082007 2009 2010 2011
£million
2012 2013 2014
2005 2006 20082007 2009 2010 2011 2012 2013 2014
0%
10%
20%
30%
40%
50%
60%
70%
80%
70%
100%
UK owner occupier 3%
Landed estate 16%
Unknown 1%
UK private 1%
UK prop co 11%
UK Institutional 12%
Overseas owner occupier 6%
UK owner occupier 5%
Rest of Europe 12%
UK (incl. Landed estates) 63%
Other 3%
Far East 3%
Middle East 15%
North America 4%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Stock by freeholder type (%)
Source: GVA
Overseas institutional 4%
Unknown 1%
UK Institutional 5%
Overseas owner occupier 4%
Overseas prop co 5%
Overseas private 23%
UK owner occupier 3%
Overseas institutional 4%
Landed estate 16%
Unknown 1%
UK private 1%
UK prop co 11%
UK Institutional 12%
Overseas owner occupier 6%
Overseas prop co 12%
Overseas private 31%
UK owner occupier 5%
Stock by current ownership (%)
Source: GVA
Overseas institutional 4%
Landed estate 48%
Unknown 1%
UK prop co 6%
UK Institutional 5%
Overseas owner occupier 4%
Overseas prop co 5%
Overseas private 23%
£million
2005 2006 20082007 2009 2010 2011 2012 2013 2014
10%
20%
30%
40%
50%
60%
70%
80%
70%
100%
UK owner occupier 3%
Landed estate 16%
Unknown 1%
UK private 1%
UK prop co 11%
UK Institutional 12%
Overseas owner occupier 6%
UK owner occupier 5%
Rest of Europe 12%
UK (incl. Landed estates) 63%
Other 3%
Far East 3%
Middle East 15%
North America 4%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Stock by freehold source of investment (%)
Source: GVA
gva.co.uk/research I 3
Who owns Mayfair and St James’s? | Spring 2015
