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Brexit fears, coupled with the traditionally quiet summer break, have contributed to the slowdown, according to LSH.

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  • What’s the latest?

    Sales of commercial property across the UK have dropped by 25% over the past year alone.

    Between July and September, £9.5bn of commercial property was bought and sold, down a quarter on the same three months last year, according to commercial property agent Lambert Smith Hampton (LSH).

    The office sector bore the brunt, with investment during the summer tumbling 44% short of the five-year average.

    And sales of central London offices were at the lowest level in five years.

    Why is this happening?

    In addition to the traditionally quiet summer break, Brexit fears have dampened investor appetite in UK commercial property.

    But on the plus side, last month was the third busiest September for sales of commercial property on record, as the devaluation of the sterling helped to lure overseas investors to the marketplace.

    The activity was also driven by open-ended funds - a collective investment scheme - selling off shops after the EU referendum vote.

    Industrial and office property for sale.

    Above: Centennial Park for sale near Borehamwood, Hertfordshire, for £3m. 

    Sounds interesting. What’s the background?

    Interestingly, local authorities have rapidly emerged as major buyers of commercial property, snapping up £577m of assets during the three months.

    It is the largest volume of commercial property purchases by public sector bodies on record, smashing the previous high of £260m.

    Ezra Nahome, chief executive of LSH, said: “With their budgets facing growing pressure and interest rates at an all-time low, a number of forward-thinking councils have started to make their balance sheet work harder by acquiring commercial property.

    "This is likely to be an area of considerable growth over the coming quarters.”

    Meanwhile, yields across commercial property have continued to climb since the EU vote in June to stand at 5.7% during the third quarter.

    The industrial sector was the only core part of the commercial property market to see yields fall, to 5.54%.

    Nahome added: “It’s important not to get too carried away by the uptick in activity that we’ve seen in September. Predictably, post-referendum, the third quarter has been the quietest quarter since the middle of 2013.

    The market has been much busier since the sector returned from its long summer break, helped by a lower pound and the retail funds’ sell off – but investors are still cautious and selective.”

    LSH predicts sales of commercial property to reach £45bn by the year-end. This would be almost £20bn down on last year’s record £64.3bn and the lowest since 2012.

    Top takeaways

    • Sales of commercial property between July and September hit £9.5bn – down 25% on the same three months last year.
    • Last month was the third busiest September on record for commercial property transactions.
    • Local authorities have played an unusually active role over the summer, buying £577m of commercial property – the largest on record.

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