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Cash rich funds from Germany, France and Italy head up London commercial recovery

Some £1,433 billion was invested in the West End, City and Docklands in the second quarter of 2009, an increase of 110% on the first quarter of the year, according to new figures from Cushman & Wakefield.

Its analysis says that the central London property investment market is likely to be leading the recovery in Europe and the increase in activity is further evidence that overseas investors see value with yields at an historic high.

Cushman & Wakefield's forthcoming monthly yield report is also expected to show that weight of money is now putting some pressure on prime yields in the City of London.

'The most significant observation is the dominance of the overseas investor. Over 60% of West End transactions have been completed by overseas funds or private organizations. Their interest has been fuelled by a perception that the London market represents relatively good value, the continuing weakness of the pound and the lack of competition from the traditional UK/Irish debt buyers,' explained Clive Bull, Head of central London investment and a partner in Cushman & Wakefield's London Group.

Asked if this represented the start of the recovery or some kind of false dawn, he replied; 'There is encouraging evidence that it is the former with a further £275 million of stock under offer in the West End and £167 million of deals which have exchanged but yet to complete.'

Most of the current activity is focused at the prime end of the commercial market with German, French and Italian funds driving hard due to a weak Pound, low interest rates and a general perception that yields across London are high. Activity in the more secondary end of the market continues to be frustrated by the lack of suitable finance for riskier assets.