Westfield Group, the retail property company behind the White City centre in West London, has shelved plans to sell out of its £530 million UK shopping centre fund after failing to find a buyer during a six-month search.

The collapse of the Westfield deal will send shudders through Britain’s £700 billion commercial property market, in which the value of some retail assets is feared to have fallen by as much as 30 per cent since the beginning of the year.

Separate figures out this week reveal that sales of Central London office property slumped by nearly two thirds to £2.3 billion during the final quarter of this year, compared with the previous three months, as the credit squeeze froze out leveraged buyers.

Figures for the fourth quarter would have been worse but for the recent completion of the delayed £1 billion sale of Citigroup’s headquarters at Canary Wharf. The deal was announced in July but was completed only this month as the buyers struggled to secure debt finance.

The findings from Cushman & Wakefield, the property agent, show that prices of prime offices in the City have fallen by more than 20 per cent since the summer, as demand from investors dropped off.

Buyers were hit by an increase in the cost of debt. Moreover, after August, property finance became harder to source as banks tightened their lending criteria.

Stephen Lowy, managing director of Westfield, blamed the difficulty that potential buyers had in getting credit for his company’s decision to pull both the sale of a one-third stake in its UK shopping fund and plans to offload two shopping centres in New Zealand valued at about £132 million.

He said: “It’s probably not the best time to sell something and, given that we’re not a forced seller, we decided to take it off the market and deal with it at another time.”

In July Westfield began marketing a one-third stake in its UK shopping fund, which has 25 per cent interests in four of its UK shopping centres with a combined value then of £2.1 billion. Thefour shopping centres are the Westfield-branded malls at Merry Hill, Dudley, in Belfast, in Tunbridge Wells and in Derby, where there is a newly completed development. Westfield sold the stakes in the centres to the UK shopping fund in July, quickly offloaded a two-thirds share in the fund to big overseas pension funds and then started to market the remainder to new investors.

The UK shopping fund paid £380 million for the stakes in three of the centres, representing an initial yield - the value of rent as a proportion of capital value – of 4.3 per cent.

However, figures out from Investment Property Data Bank suggest that yields may have widened by as much as 1 percentage point since, reflecting price falls of up to 20 per cent or more. Its figures show that prices of retail assets fell by 2 per cent in October and by 4.3 per cent in November.

Tim Sketchley, chairman of Cushman’s capital markets group, said that yields for top-quality City offices had widened from 4.25 per cent in early summer to 5.25 per cent today. At constant rents, that implies a price fall of 23 per cent. Mr Sketchley believes that equity buyers will return shortly. He said: “This slowdown is a capital event, not a property event. Back in 1992, one in five City buildings were empty. Now only one in twenty are vacant. We are close to the tipping point. The change to positive sentiment will be rapid.”

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts