German fund buys BP's HQ in Aberdeen's biggest deal for nearly a decade

Published on Saturday 3 May 2008 14:56

In a deal that commercial property experts are calling the biggest in the city for nine years, the sprawling office complex close to Aberdeen Airport has been sold to German fund TMW Pramerica by its previous owner, Goodman Property Investors. BP rents the 207,000sq ft glass-fronted property for £3.6m a year.

Property experts say the deal is a sign that confidence is slowly returning to the battered commercial property investment market, which entered a severe slowdown after the onset of the credit crunch last August.

The value of investment deals in the UK fell from close to 16bn last July to less than 8bn during the final three months of 2007 as activity dried up.

Although the number and value of deals is still well down on last year's levels, experts argue that momentum is gradually picking up again.

Kenny Waitt, director of Jones Lang LaSalle, said investment activity in Aberdeen is particularly buoyant, as opportunities in the oil and gas industry are drawing the interest of foreign funds.

He said of the BP deal: "This is certainly one of the first deals involving a German investor in Aberdeen, and it is a vote of confidence in BP and in the city.

"There are other significant investment opportunities arising in Aberdeen that are certain to attract international interest, particularly in the office sector on the back of more space being taken by companies in the oil and gas and professional services areas. Companies in the Aberdeen area are experiencing major growth and require additional office and industrial accommodation."

But, according to Peter Damesick, head of research at CB Richard Ellis, activity is unlikely to return to previous levels until property owners accept that there has been a re-pricing in the market.

He said there is certainly no lack of interest, particularly from sovereign wealth funds and other overseas investment groups, but the market is witnessing a stand-off between buyers and sellers, who still have "unrealistic" expectations of the prices they can achieve.

This is likely to continue for several more months, he expects, but he raised the possibility that banks may force borrowers to dispose of assets later this year. He argued that some borrowers could find themselves in breach of their loan to value agreements as prices continue to fall. "That could trigger some disposals," he said.