The ramifications of the credit crunch continue to depress the Central London property investment markets with deals down 40%, says Cushman & Wakefield.

It said that a total of £1.24bn of deals took place during the third quarter, which was a 40% drop on the second quarter and just 20% of the total turnover in the third quarter of 2007.

The global property consultant said that 80% of this turnover was attributed to overseas investors, with German funds accounting for 40% of that figure.

In the West End during the third quarter £690m of investment transactions took place - down nearly 60% from 2007 third quarter totals of £175bn. It was also down from the second quarter of this year when £928m of deals took place.

Clive Bull, partner at C&W, said: ‘Sentiment is one of understandable caution particularly in the light of the most recent financial turmoil but there is both transactional activity and a significant amount of international equity ready to move into market, as and when conditions stabilise.’

C&W said the City of London market remained fragile during the third quarter with transactions down 50% on the second quarter and reaching just 10% of 2007’s third quarter turnover.

A total of 16 deals were completed totalling around £550m with many investors affected by the difficulty in raising finance at ‘commercially acceptable levels’.

German open-ended funds carried out £335m of deals in three purchases with Deka buying Hammerson’s Moor House for around £230m at a yield of 6.4%, Commerz Real bought Athene Place for around £90m at a yield of just under 5.8%.

It said that the end of the quarter prime yields have now drifted out to ‘at best 6%’.

Bill Tyser, partner at C&W, said: ‘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.'

‘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.’