Overseas - predominantly equity - investors will increasingly dominate the London market at the expense of debt buyers as the number of active lending banks declines, according to property adviser Gresham Down Capital Partners. Polarisation is set to increase not just between primary and secondary stock but also between investor type, the firm predicts in its latest investment report. It notes that overseas equity investors already represent almost 50% of buyers across Central London.

Looking at the outlook for debt buyers, Gresham Down says that the number of active lending banks has fallen from 25 to no more than 10-15 currently, with most reluctant to lend on all but core product. Accordingly, yields are already softening on both non-prime stock and larger shorter dated single-let transactions of over £100 mln (115 mln).

According to the firm, there is more than £6.5 bn of commercial property for sale across Central London. The City represents the largest element with £5.02 bn while the West End total is £1.56 bn. Looking forward, the adviser sees the trend of banks selling or encouraging their borrower clients to sell 'accelerating with further stock being added from owners looking to take profit on purchases made within the past 2 years and from maturing loans within CMBS portfolios'.

The firm advises equity buyers to 'position themselves on sales that are vulnerable to future pricing movement and on buyers who have to sell, such as banks and owners under pressure'. On the selling side it cautions vendors to be 'increasingly aware of counter-party risk from debt-based buyers and focus on equity buyers, even though these bids may be at lower levels'.