EUROPE - The Central London commercial property markets are continuing to fall under pressure from the current financial and economic crisis but indicators suggest overseas investors are still willing to consider deals, according to London-based commercial real estate services firm Cushman & Wakefield.

In its latest research, Cushman & Wakefield found the number of total transactions in Central London fell by 40% in the third quarter of 2008 compared with the second quarter with a total volume of transactions worth €1.61bn.

Overseas investors, notably those from Germany, accounted for most of the business as figures showed almost 80% of contracts were signed by international investors, and German investors accounted for two-thirds.

Cushman & Wakefield claimed this shows confidence in a depressed market which should offer high return potential once favourable market conditions returned.

"Sentiment is one of understandable caution particularly in the light of the most recent financial turmoil," said Clive Bull, a partner in the firm's Central London specialist team.

"But there is both transactional activity and a significant amount of international equity ready to move into market, as and when conditions stabilise," he added.

Of London's two main commercial areas, the City - one of the world's premier financial centres - showed a touch more resistance to the economic downturn than its neighbour, the West End, home to London's main shopping and leisure districts.

The number of deals in the City was half those seen in the second quarter, while transactions in the West End were down 60% over the same period.

"There has almost been a complete lack of transactional activity in the secondary market especially for buildings with short-term income stream and those which require considerable capital expenditure on lease expiries," said Bill Tyser, a partner in Cushman & Wakefield's City investment team.

"The price correction on these properties continues but, generally, there remains a stand-off between vendor and purchaser," he added.

Tyser said he expected further changes in valuations, with results for the final quarter of 2008 matching those of the third.

"The outlook remains one of further correction especially in the secondary market. Recent market events on Wall Street and in the City of London are likely to further exacerbate the current concern over supply and demand of office accommodation and the potential impact on rental levels as well as making the ability to raise finance for investors both extremely difficult and expensive," he claimed.