Almost nobody bought offices in London in the final quarter of 2022 as the market turmoil from now-abandoned government spending plans sent borrowing costs soaring.

Less than £400 million (€450 million) of offices in the UK capital were bought and sold in the final three months of the year, an 88 per cent drop from the prior quarter, according to CoStar, a property research firm. The dealmaking freeze – worse than the decline during the financial crisis or Covid-19 lockdowns – came as former prime minister Liz Truss’s proposals for unfunded tax cuts spooked markets.

About £6.4 billion of deals were recorded in the first quarter, when investors were pricing in a gentle increase in rates – an outlook that drastically changed during the year as central bankers tried to get a grip of inflation and markets struggled to digest Truss’s plans. Over the past 20 years, about £3.5 billion of offices have been bought and sold each quarter on average, CoStar’s data show.

The freeze in deals comes as buyers wait for rates to feed through to valuations. Would-be sellers have yet to mark down their holdings or breach their loan terms, which could pressure them to sell. – Bloomberg