High-Yield Office Building in Canary Wharf
Recently, I received an intriguing email about a building around Canary Wharf that’s up for sale. This office building spans 91,000 sqft over basement, ground, and ten upper floors, and it includes 107 parking spaces. It’s priced at £22 million, which is steep, but what’s really noteworthy is the 10.54% net initial yield. Historically, offices in Canary Wharf have traded at yields of 6-7%. This high yield reflects a significant shift in the market for large office blocks.
Potential Redevelopment Opportunities
The current owners likely see it as an end-of-life asset, opting to sell now possibly for redevelopment into residential units. The building generates £2,360,364 per annum, and potential buyers have the option to break leases by 2025, aligning with redevelopment plans. This scenario illustrates how office buildings, once considered extremely valuable, are now positioned differently in the market.
The Impact of the Upcoming General Election
Switching gears, the upcoming general election on July 4th adds another layer of uncertainty. The sight of Rishi Sunak announcing the election date under pouring rain captured the mood of the nation. The economic outlook could shift dramatically depending on the election outcome. Labour, if victorious, plans significant planning reforms which could benefit the property industry. However, broader economic issues, including rising mortgage rates and living costs, demand immediate attention.
Importance of Market Monitoring
In this context, monitoring market trends becomes essential. I’m releasing my May statistics for commercial property purchases to provide insights. These stats are derived from my asset management and accepted offer accelerator clients, offering a snapshot of current market conditions.
Asset Management vs. Accepted Offer Accelerator
Asset Management involves working with investors looking to build portfolios worth £500,000 or more, focusing on long-term growth. In contrast, the Accepted Offer Accelerator is a nine-month program coaching clients to get under offer on their next commercial property. The Accelerator offers a money-back guarantee if the client doesn’t secure a property within the timeframe, reflecting its 100% success rate.
Current Market Trends
As of May 2024, it takes an average of 117 days to get under offer on a commercial property, approximately three and a half months. This timeframe might seem lengthy, but it’s necessary for clients to define their investment goals and search the market. It’s about more than just numbers; clients must also like the look and feel of the building to proceed.
Deal Analysis and Decision Making
The initial phase involves analyzing deals, which can be time-consuming. With practice, clients become more efficient, quickly discarding unsuitable deals. Our discussions then shift to asset management potential and strategies to increase building value, rather than just deal analysis.
Market Statistics
Currently, the average price point for agreed deals is £197,611.11, just shy of £200,000. These properties generate rental incomes of around £25,000 per property, yielding a gross yield of approximately 13.18%. After accounting for mortgage payments and property management, this is a healthy starting yield.
Quick Return on Investment
Interestingly, it takes an average of 74 days post-purchase to recoup my service fees, assuming the property is fully let. This timeframe underscores the market’s efficiency and potential for quick returns.
Risk and Reward
The average yield of 13.18% suggests that my clients prefer slightly riskier properties, which allow for more interesting investment opportunities. Clients often seek to quickly reinvest their money, necessitating deep conversations about immediate and future prospects.
Final Thoughts
Understanding the commercial property market’s current state requires awareness of broader economic and political contexts, such as the upcoming general election. However, solid data and trends can guide successful investments. For example, properties under £200,000 can yield substantial rental incomes and quick returns, despite the varied times it takes to get under offer, ranging from 7 to 258 days.
Staying informed and adaptable is key to navigating the commercial property market effectively. If you want more insights or need assistance, feel free to contact me at ncrealestate.co.uk. Join our Instagram community @ncrealestateltd for top tips on commercial property investment. Thanks for reading, and I look forward to catching up with you soon.
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