KPMG is looking to offload it’s London headquarters in Canary Wharf in a bid to monetize on the booming central London commercial property market.
Property firm JLL is being tasked to find a buyer for the building in the center of the business district, but will remain in occupation after it is sold – a leaseback deal.
The professional services company currently occupies the entirety of the 14-storey, 434,000 sq ft building, and the property is expected to fetch more than £400m.
Philip Davidson, Managing Partner at KPMG, said the decision to sell the building reflected the company’s strategy of not owning buildings in order to free up cash to invest elsewhere in the business. It currently leases 22 buildings in the UK.
“As a firm we are making considerable investments developing technologies to provide new services and solutions to our clients, while enhancing traditional processes like audit. This transaction will accelerate that ambition,” he said.
He also added that the firm had been motivated by “strong demand from investors for prime London assets”.
“We want to capitalise on this rising market,” he said.
Data from Savills released this week showed that investment in commercial property in central London has topped £11bn so far this year, with the City market seeing its strongest trading in a decade.
July was the strongest month recorded since March 2007 for the City, where £2.1bn worth of property changed hands. This number was boosted by the sale of 20 Fenchurch Street, known as the Walkie Talkie, which was sold for £1.28bn to Hong Kong-based Infinitus Property Group.
In London’s West End market, £252m was transacted in the same month, with the largest deal the sale of a building on the Strand for £68.25m.
Asian investors have continued to dominate the market, accounting for 63pc of total City turnover in the year so far, followed by European investors at 17pc and UK investors at 11pc.
Stephen Down, head of Savills central London investment team, said the value of deals for 2017 as a whole could surpass last year’s total of around £17bn.
Andrew Hawkins at JLL stated, “We expect to receive a high level of interest from both domestic and international investors, keen to secure a long-term, index-linked income secured against a flagship asset in one of London’s most prominent business locations”.
DealMakerz thinks we may see a lull in the residential property market in London, but the commercial business is currently booming and companies are right to take advantage of this through leaseback deals.
As foreign investment continues to be flow into commercial London property, in part thanks to the ever-weakening pound, it will be interesting to see the reaction of large multinationals who own property in London. Not all will follow the same leaseback path as KPMG, with many viewing their property assets as pivotal to the company’s success. In fact, retail firms such as Sainsbury’s and food giant McDonalds base their entire growth strategy on commercial property acquisition. Others prefer to lease their real estate, but monetise it in other ways: Tesco were one of the first in the UK to take advantage of’ ‘air right’s and created hundreds of residential units above their store.
Will they be tempted to liquidate their asset and cash in during this boom? As usual, DMZ will keep you posted.