Central London investment slumps to three-year low

The fall-out of the credit crunch continues to affect the Central London commercial property investment market, according to the latest investment market figures from global property consultant Cushman & Wakefield. Just £2.83bn (EUR 3.59bn) transactions took place during the first quarter of 2008, which is significantly down on the total of £3.9 bn (EUR 4.9 bn) for the same quarter last year. According to the report, the figures for 2008 are the lowest Q1 volume recorded for more than three years.

The City was the worst hit, with total turnover for Q1 approximately £1.25bn (EUR 1.58bn), which is around half that for the same period in 2007. In comparison to the average of the last four quarters, when some £2.5bn (EUR 3.1bn) worth of property was traded, 2008 has seen a 50% reduction in turnover by comparison.

Bill Tyser, partner, City investment at Cushman & Wakefield said: 'Generally leveraged buyers have found it extremely difficult to find properties with sufficient returns to match a more difficult and more expensive credit market. Therefore whilst there still remains a large weight of investor money prepared to consider acquisition in the market, the lack of credit and low property returns is and will for the time being hamper wider activity and the resumption of a more balanced market.'

Investment volumes in the West End were closer to the Q1 average levels in 2007. But, C&W pointed out that the majority of the £1.57bn transactions were largely a result of institutions selling during to satisfy redemptions and this activity has now largely ceased. The report also noted that Q1 figures were distorted by a few large transactions including Invista portfolio £200 mln (EUR 254mln), GPE/Co CO deal with Crown Estate at £350 mln (EUR 444mln), and sale of Metropole Building for £130mln (EUR 165mln).

However, Clive Bull, head of central London investment at Cushman & Wakefield said: 'There remains a significant amount of equity looking to get into the London market as evidenced by the increased activity from the overseas buyers. There is understandable caution in the occupational markets but in the City and particularly in the West End, the office vacancy levels remain extremely low.'