Third quarter deals 40% down in London’s commercial property market

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by Lin Freestone

The central London property market continues to be depressed, with 80% of turnover being attributed to overseas investors.

During the third quarter of the year to the end of September, deals worth £1.24bn were completed in the commercial sector of the market. This is 40% lower than the completions in the second quarter of this year.

During the third quarter of 2007, there were transactions totalling £6.08bn. The figures for the last three months just revealed by Cushman & Wakefield are just 20% of the activity at the same time last year.

The market in the City of London remained fragile during the third quarter. Transactions were 50% lower in the second quarter and reached just 10% of 2007’s third quarter turnover.

A partner at Cushman & Wakefield reports that 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.

The price correction on these properties continues, but generally there remains a stand-off between vendor and purchaser in terms of bid-offer spreads.

It is considered that recent market events in the US 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. In addition, it will make the ability to raise finance for investors both extremely difficult and expensive.