Investment in UK commercial property sank to its lowest level in four years during the quarter after the Brexit vote, with the City of London and Scotland suffering worst as cautious investors retreated from the sector.

Some £8.7bn was invested into property in the three months to September, while the average deal size dwindled to £13.6m, its lowest since the depths of the financial crisis in 2009, according to the first comprehensive post-referendum data.

Investors bought £1.7bn of central London offices during the quarter, a drop of almost two-thirds from a year earlier, with only four deals of more than £100m, down from 15 the previous year.

“Everyone has been sitting on their hands. They are not sure where the prices are, and a lot of properties have been withdrawn because the sellers were not prepared to accept the prices being offered,” said Mark Stansfield, managing analyst at CoStar Group, which issued the data. “Especially in central London, investment is down quite sharply.”

A number of deals fell through and buildings were withdrawn from the market over the referendum period. These included an office building at 1 Wood Street in the City of London, which the German investors KanAm had been in talks to buy for £190m before the vote. The office building is now being marketed again for £180m — about 5 per cent less than its pre-referendum price.

A West End building at 76 Wardour Street was on the market for £90m but withdrawn because of a lack of interest.

It is not only London buildings that have been affected: in Manchester, a landmark office block at 1 St Peter’s Square was under offer at £175m before the June 23 vote, but subsequently sold to Deka Immobilien for £164m, a 6 per cent cut.

Investment in Scottish property, meanwhile, dropped 74 per cent year on year to £191m amid fears of a second independence referendum. However, the acquisition of a 75 per cent stake in the £1bn St James Centre regeneration project in Edinburgh by Dutch pension fund APG will boost investment volumes in the fourth quarter.

Mr Stansfield said a series of large expected sales — including CityPoint tower, being marketed for £600m, and the headquarters of the law firm Pinsent Masons at 30 Crown Place for £220m — would also help the London market to recover. But he warned that “prices will likely continue to fall”.

In the third quarter, properties across the UK were selling for an average of 6 per cent below their asking prices, having sold for above the asking price for the preceding three years.

Average price falls in commercial property since the referendum have been moderate, albeit based on low transaction volumes. UK values dropped 3.3 per cent in July but the decline slowed to 0.5 per cent in August and 0.2 per cent in September, according to CBRE, the property agents.

Stock market investors remain more pessimistic on the sector, reflected by UK real estate investment trusts trading at 13 per cent below their pre-Brexit prices.

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