London prime office market frozen as sellers refuse to lower prices

International investors seeking bargains in London’s prime office market following the Brexit vote are being frustrated because sellers will not lower prices, according to Jones Lang LaSalle.

That has brought the market to a standstill, which may last for up to six months, said Colin Dyer, the chief executive of JLL. JLL is the second-largest publicly traded commercial-property brokerage behind CBRE Group.

“We are seeing a lot of demand from Europeans and Asians for investment purchases in London, but we are not seeing any sales because the sellers are saying ‘I am going to wait’,” said Mr Dyer, who is retiring as JLL’s chief executive next month. “Investment markets are much more on/off, and they can react quite quickly, so they switched off very fast.”

Buyers and sellers are trying to find the appropriate valuation for prime office property in London and a 10 per cent decline “seems to be the price correction”, according to Mr Dyer. CBRE said last month that City of London office values fell 6.1 per cent in July on heightened economic uncertainty, particularly for financial-services firms.

In the medium to long-term, London remains an attractive location for property investors, and its features as a financial center cannot be easily copied, Mr Dyer said. Strong demand from overseas may cause prices to return to pre-Brexit levels, because the fall in the value of the pound makes the United Kingdom capital even more attractive, he said. The pound has declined more than 10 per cent against the yen since the vote.

“So if you are Japanese investor, or Chinese or American, you just saw the currency drop 10 per cent, and you saw the pricing probably drop, maybe 10 per cent, so you have a 20 per cent reduction,” Dyer said. “So it looks like a very decent deal.”

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