West End investment market in trouble, says Cluttons

London's West End investment market witnessed its worst performing quarter for a year and its slowest quarter for three years as transactions fell by 50% in the third quarter of 2008, according to consultant Cluttons.

The firm’s latest West End Quarterly Office Update found that speculative space on the market rose by 100% in a year to its highest levels in three years and tenant demand fell 25% from this time last year.

According to the report, an alarmingly low number of outstanding planning applications are awaiting approval, down to just 70,000ft², suggesting lack of confidence amongst developers.

Bill Siegle, head of commercial at Cluttons, said: “There is no doubt that the strength has gone out of the investment market and with it the confidence of many developers.

“Core West End yields of 5.25% continue to attract overseas buyers but interest from home-grown funds is at an early stage and the events of last week will make it harder for them to identify the appropriate level of risk to income.

“Those funds who recently began looking at the market again will need to hold their nerve.”