The German banking giant said having already seen some downward adjustment, capital values were expected to fall by a further 15pc to 20pc in central London as rents fall and yields continue to rise.
But the downward trajectory shouldn’t be sustained, Deutsche said, with the market expected to bounce back quickly.
But caution is being urged in the short-term.
“The anticipated economic slowdown, in light of rising inflation impacting private consumption, will likely have a material impact on real estate occupier and investment demand throughout the remainder of this year,” Deutsche said in a new report for investors.
“Furthermore, the future relationship between the United Kingdom and the European Union remains uncertain, weighing on business sentiment, particularly with access to the single market now in doubt.”
But Deutsche said London usually quickly bounces back following a period of market adjustment, and its forecasts show a strong recovery in values after the fall.
“Supported by London’s unique global strengths, we see a high possibility of a strong rental recovery from 2019 as economic uncertainty fades and new supply moderates.”
Investment in London offices fell 17pc last year to £15.9bn, according to research compiled by Savills.
Vacancy rates in the City of London, the British capital’s main financial district, climbed in the second half, Savills said.
International businesses may move as many as 100,000 jobs out of London within two years of when the UK officially starts the process to leave the EU because of concerns that businesses will lose access to the single market passporting rights, according to Jefferies Group LLB analyst Mike Prew.
Meanwhile, more than 70pc of engineers say the company they work for is looking at mainland Europe as a new market for trade in the face of Brexit, followed by the Middle East and then Asia Pacific and North America in order of preference, a new Engineers Ireland survey has found.
The survey also found that as many as 24pc of engineers based in the Republic of Ireland believe their company is now less likely to trade with Britain in the face of a hard Brexit.
Some 3,000 member engineers were surveyed across the Republic, the North, and Britain.
Independent /Bloomberg
