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German funds dominate London RE transactions

Investment in commercial real estate in London fell by three-quarters in the first three months of 2008, compared to the same period in 2008. Just £679m of property changed hands in central London in the first quarter of 2009 against £2.8bn in Q1 2008 and £3.9bn Q1 2007.

German and overseas real estate funds dominated the London commercial real estate market in the first three months of 2009, according to real estate services firm Cushman & Wakefield.

Just £679 million ($1.02 billion; €770 million) of commercial property transactions took place in the UK capital in the first quarter of this year, compared to £2.8 billion in the first quarter of 2008 and £3.9 billion in the same period of 2007.

Despite lower transaction volumes, German real estate funds were among the larger players in the first quarter, particularly in the City of London, with two funds alone acquiring two landmark properties for a total of £126 million. Overall, overseas investors accounted for 60 percent of all deals in the City of London in the first three months of 2009.

Germany's TMW Real Estate Group bought 11 Pilgrim Street for £56 million while GLL Real Estate Partners acquired Governor’s House for £70 million. Swiss fund AFIAA also acquired Garrard House, Gresham Street, for £70.5 million.

In London’s West End market there were just 14 transactions valued at a total of £200 million – an 87 percent drop from the first quarter of 2008.

Bill Tyser, head of Cushman & Wakefield’s City of London investment group, said overseas investors were some of the active buyers and sellers in the first quarter, with interest expected to grow as UK interest rates remained low and the sterling currency stayed weak.

Investors, he added, were targeting good quality “defensive” investments. “Those properties that do not match the criteria of good quality buildings, the market remains remarkably thin and largely dysfunctional due to the difficulties which continue to be experienced in securing satisfactory financing terms.”