London Briefing: The £1.1 billion sale of the HSBC building in London's Canary Wharf financial district earlier this week underlines the remarkable boom in the capital's property market in recent years.

It is the biggest price ever paid for a single building. As many as 180 possible bidders looked at the building in the early stages of the sale and there were at least a dozen serious contenders in the end - one of which is thought to have been Dublin's Derek Quinlan.

The £1 billion-plus price far exceeds the previous record of £650 million set just a couple of weeks ago for Citypoint, a 34-floor office block in the heart of the Square Mile. London's third-tallest building, Citypoint was bought by the US real-estate investment firm Beacon Capital Partner, one of many overseas buyers that have flooded into the London market.

A foreign firm is also behind the purchase of the HSBC building. Madrid-based Metrovacesa is Spain's largest property company and the HSBC deal is a key part of its strategy to expand further outside the over-stretched Spanish market.

The string of mega-deals, including the £600 million paid by German investors for the Sir Norman Foster-designed Swiss Re building, widely known as the Gherkin, in February, has now put London on course to overtake Manhattan as the world's most expensive location for office space.

More than £60 billion was invested in the British commercial property sector last year, with volumes the highest for 20 years, and overseas investors accounting for some £13 billion of that. In the first quarter of 2007, overseas buyers are thought to have accounted for as much as 60 per cent of all investment in the sector.

Returns have soared, hitting 19 per cent in 2005 and 18 per cent last year, according to figures from Investment Property Databank. In London, returns on office space have been little short of spectacular, topping 25 per cent every year over the past three years.

Although there are fears that the top of the cycle could be looming, bullish observers say there is more still to come, highlighting the continued shortage of space in the capital; London's growing reputation as the world's leading financial centre; and its appeal as a "safe haven", which is particularly attractive for overseas buyers.

For the Spanish, the London market must look particularly secure after the slump in their own property market earlier this month. Panic selling on the Madrid exchange saw property shares collapse amid fears that Spain's long-running property boom has shuddered to a halt, which would have severe implications for the wider economy there.

One intriguing feature of the HSBC/Metrovacesa deal, which will see the bank and its 8,000 employees continue to occupy its 45-storey building, is the very low yield the new Spanish owners have been prepared to accept. The building is being leased back to HSBC for 20 years, on an initial yield of less than 4 per cent, far lower than the 5 per cent-plus yields seen in other large property deals.

But, for the Spaniards, the prestige of owning one of London's biggest office blocks, together with the security of having a large global player such as HSBC signed up to a rent of £43.5 million a year until 2027, was clearly enough to outweigh the below-par returns.

The early-morning meeting today between Alliance Boots and the retail analysts who follow the company is likely to be a fractious affair. Scheduled originally for the presentation of the group's annual results, it has been rendered largely of historic interest by the pending £11 billion buyout of the business.

But, in an ill-tempered postscript to the record-breaking buyout - the first of a FTSE 100 company - the City of London's "teenage scribblers" have come in for some stick. Just days after the Kohlberg Kravis Roberts-backed bid for the group swept to victory, City grandee Sir Nigel Rudd, the Alliance Boots chairman, blasted retail sector analysts for their lack of understanding of the business.

Not mixing his words, Sir Nigel said most of them were a waste of time, and were "stupid" for failing to appreciate the benefits of the original merger of the Boots and Alliance UniChem businesses last year.

His words caused a storm of protest from the company's followers and the Alliance Boots chairman is likely to be more circumspect today.

But if the teenage scribblers want to get their own back, they need only ask Sir Nigel how he justifies recommending an offer of £10.40 a share, when the final take-out price eventually climbed to £11.39.

It's not just analysts, it seems, who have been known to undervalue a company.

Fiona Walsh writes for theGuardian .