London’s commercial property deals 50% down on last year

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by Lin Freestone

Commercial property transactions in the City of London and London’s West End in the first half of 2008 have dropped by 50% in comparison to those carried out in the first half of 2007.

Figures from Cushman & Wakefield (C&W) indicate that the volume of investment transactions in the first half of this year fell to £4.9bn. During the first six months of 2007 transactions totalled £10.3bn.

As an illustration of the bleak state of the market in London, in the second quarter half of the turnover in the City of London came from the sale of just one building. Middle Eastern investors bought the Willis building from British Land for £400m in May.

A partner at C&W has predicted that yields will continue to rise and turnover will remain subdued as rental levels are beginning to come under pressure and the availability of finance is continuing to be restricted and expensive.

The market in the West End has been held up by retail property deals rather than offices, with transaction volumes falling from £1.4bn to £930m.

With the historical attractions of the West End being balanced against pressure on office rents, continuing shortage of debt and an economy faced with less disposable income, the outlook remains one of caution.