Investment sentiment in the City of London office market for securely let prime assets has continued to improve in the last three months, according to property services firm BH2.

In its City of London Market Commentary for the 2nd Quarter of 2009 published on Friday it said that in certain instances yields have hardened by as much as 75 basis points during the first six months of 2009.

It said there was £1.1bn of transactions, involving 18 properties, during the second quarter, compared with £355m during the first quarter. Foreign investors were the most active buyers. UK institutions and property companies were the most prominent sellers.

BH2 said there remains a shortage of available stock and there is also a ready appetite for secondary assets where the pricing for short term cash-flows correlates with vacant possession/site values.

In the occupational market BH2 said there was 880,000 sq ft take-up during the second quarter with 600,000 sq ft of grade A take up compared to only 150,000 sq ft for the first quarter of 2009. It said the aggregate take up for the first six months was 1.43m sq ft with occupational demand of around 6.4m sq ft of which 2.7m sq ft is ‘active’. It said there was also potential demand of 3.7m sq ft.

The overall and grade A vacancy rates remained static at 10.30% and 7.50% respectively.