A major investment deal in the City of London has fallen through as the credit crisis continues to wreak havoc.

German fund manager SEB has pulled out of plans to buy ING Real Estate’s 88 Wood Street scheme.

It agreed to buy the Fosters & Partners-designed development last month from ING for around £180m reflecting a yield of around 6.7%.

It is the second time ING has seen a sale fall through.

The building was previously under offer to Atlantic Property Partners for around £190m but the deal fell through.

The news will be a huge blow to the city market which has seen investment totals plummet in the third quarter of the year.

Cushman & Wakefield reported this week that a total of 16 deals were completed totalling around £550m during the third quarter in the City.

This was down 50% from the second quarter and reached just 10% of 2007’s third quarter turnover.

All eyes will be on the ongoing negotiations at Milton Gate on Moor Lane where German close-ended fund Signa Deutschland is under offer to buy the 200,000s q ft scheme from UBS Global Asset Management.

It placed the building under offer around £180m which would reflect a yield of around 6.7% but negotiations are ongoing.

Jones Lang LaSalle advises Signa Deutschland and SEB. DTZ and CB Richard Ellis advise UBS. Strutt & Parker advise ING. All parties declined to comment.