Property giant City Developments Limited (CDL) has acquired a prime freehold commercial building in London for £183 million (S$328.5 million), it announced yesterday.

Aldgate House is near Aldgate Underground Station, which is adjacent to the financial district and within a five-minute walk from six other stations.

Aldgate House has a net lettable area (NLA) of 211,000 sq ft, including Grade A office, retail and ancillary spaces over two basements, ground, mezzanine and eight upper floors.

It has an occupancy rate of 88 per cent and is achieving a passing yield of about 5 per cent.

CDL noted that more than 45 per cent of the office rentals in the building are below market rates for the Aldgate area, adding that "there is strong potential for positive rental reversions".

The developer said central London's office market outlook is positive with rental growth expected to continue into 2021, bolstered by heightened demand and tightening of both existing office stock and new supply.

Investment sales in the City of London area are also recording their highest level of activity since the end of 2015.

Group chief investment officer Frank Khoo said yesterday: "A key focus for CDL is to grow our recurring income significantly over the next 10 years through acquisitions and organic growth, which will help to mitigate the volatility of development projects.

"This acquisition will enhance CDL's recurring income portfolio.

"We see tremendous potential in this... building and we continue to believe that London will remain as a global financial hub."

Mr Khoo said the Aldgate district accommodates a range of industries, including financial, fintech, legal, cultural and creative companies.

"It is also emerging as the heart of 'Digital London' and the presence of healthtech companies is expected to increase with plans to develop a world-class life sciences research facility in the vicinity," he noted.

There is also the potential to undertake refurbishment work, including renovating offices and converting unused areas into additional facilities such as a restaurant. Planning consent has been obtained for a commercial gym.

This is CDL's second recurring income asset in Britain. It acquired the prime freehold Development House office building in 2016.

The 28,000 sq ft property in Leonard Street in the Shoreditch district remains fully leased, with vacant possession expected from this quarter.

The site has planning approval to be redeveloped into a nine-storey building consisting of over 72,000 sq ft of NLA.

The acquisition of Aldgate House was funded via internal resources and is not expected to have any material impact on the net tangible assets or earnings per share of CDL Group for this financial year.