Central London’s commercial property investment levels for the first quarter of the year have dropped to their lowest level for three years as the fall out from the credit crunch continues to impact the market, says Cushman & Wakefield.
In a report published today it said that just £2.8bn of deals took place in the first three months of the year - a nearly 30% drop from the £3.9bn of deals that took place in the first quarter of 2007.
In the City of London C&W reported a total £1.25bn of investment turnover for the first quarter which was around half that for the same period in 2007 while prime yields had settled at around 5.5%.
Bill Tyser, City investment partner at C&W, 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.’
In the West End C&W said that investment volumes of £1.5bn were close to the average levels in 2007 which was ‘largely a result of institutions selling during the early part of the quarter to satisfy redemptions’. However, it said the figures were also distorted by a number of large transactions including the sale of the Invista portfolio for £200m to Prestbury and the sale of the Metropole Building for £130m to a Maltese consortium.
Tim Sketchley, chairman capital markets group at Cushman & wakefield, said: ‘We seem to be moving into the phase of the investment market where there is a mismatch between vendors ambitions and the investors' view on reality.
‘It is difficult to envisage where the market will find sufficient liquidity to reinvigorate itself within the short term but there is no doubt that there is a large appetite for prime product which is unsatisfied at the present moment from both domestic and off-shore investors.’