Central London office investment is set to drop by almost 40% year on year for the first half of 2019, according to JLL.

Research from the agency estimated H1 investment will reach £5bn, down 39% on £8.1bn last year.

UK investors have been particularly active, the research found, accounting for about a third of all transactions.

JLL’s head of Central London capital markets Julian Sandbach said political uncertainty is continuing to impact investors’ confidence in the sector, which “is most acutely felt by institutional investors who are particularly cautious due to uncertainty and understandably, risk”.

He said: “The irony of the situation is that the reverse is being seen in the occupational market where the volume of space let in the first half of 2019 is forecast to reach 4.3m sq ft, only 6% below the 10-year average.”

However Sandbach added that despite the downturn in investment volume, prices and yields have remained competitive.

However occupiers’ long-term confidence remained in the city with high profile tenants competing for the dwindling supply of top quality office space. The first half of the year saw businesses including Facebook, Sony, Brewin Dolphin and Millbank Tweed commit to large amounts of space in the capital.

JLL head of City agency Dan Burn said: “London has a dwindling supply pipeline and although many cranes can be seen across its skyline a number of these developments have been pre-leased, with broadly 48% of the buildings under construction already let to future occupiers. The squeeze is more acutely felt with 2019 product where 59% of speculative construction is now leased.

“In addition, as occupiers vie for the best space, there is a significant amount of space currently under offer, totalling 3.8m sq ft which we anticipate will push leasing totals for the year towards 10m sq ft, in line with 2018. Looking ahead, the low levels of speculative pipeline combined with the sustained occupier demand, will continue the upward pressure on rental growth, especially as the vacancy rate on brand new buildings is 0.5%.”