German fund pays £85m for XYZ

Allied London has disposed of its fully prelet building in Spinningfields to Hamburg-based Union Investment months before completion at a net initial yield of 4.8%, reflecting the strength of the market for quality office stock in Manchester.

The 160,000 sq ft building will be occupied by law firm Shoosmiths, Global Radio, and NCC Group. There will also be extensive amenity space and collaborative working areas to attract financial and technology companies.

XYZ was designed by Cartwright Pickard and is currently under construction by main contractor McLaren. Completion is scheduled for August and the offices are due to open in October.

Investment deals at sub-5% yields are rare in Manchester. One St Peter’s Square, developed by Argent and Greater Manchester Property Venture Fund, is close to being sold to Deka Immobilien, a German fund, at a price rumoured to be £180m, which would represent a net initial yield of 4.8% when the building is fully let. Of 280,000 sq ft at One St Peter’s Square 175,000 sq ft has been let to KPMG, Addleshaw Goddard and DLA Piper. In June 2014, M&G paid £320m for two buildings in Spinningfields occupied by Royal Bank of Scotland, at a yield of 4.2%.

OBI Property and Farmer Capital advised Allied London. Savills represented Union.

Allied London declined to comment.

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