Latest reports seem to suggest that the US commercial property market is starting to climb. The US economy grew at a 2.8% annual rate in the fourth quarter, helping boost demand for serviced offices, retail and industrial space. However, some fluctuations will remain as the share of troubled transactions continues to be elevated.
WE must remember that during the commercial real estate boom, many investors bought property with high levels of debt. The recession led to rising vacancies and falling values, making it difficult for landlords to refinance. The delinquency rate on loans packaged and sold in American commercial mortgage backed securities rose to a record 9.2% in February. It is obvious that most demand drivers for commercial real estate have reached rock-bottom, including office-using employment. The underlying demand for commercial real estate has begun its turnaround, but we are not going to see much price appreciation until the slack in supply is taken up. However, according to the latest figures from Co Star Group, a real estate data service based in Washington; Values were up 11% from January 2010 – so it is looking very bullish for USA Commercial property at the moment.
In Europe, however, the average fall across all commercial sectors has been 6.02% and while falls on the scale of 2010 are not expected, further declines in some parts are anticipated in the first half of 2011, says Cushman & Wakefield’s January business report on the UK property investment market.
The report suggests that the initial re-pricing of the market was driven by a lack of quality products and increasing awareness that pricing had moved too far. ‘The current stabilisation reflects the fact that pricing moved back a long way in a short space of time and we are seeing a pause for breath as the market absorbs the changes seen,’ it says.
What this basically means is that; looking at the pricing of commercial property and serviced offices, we simply do not have the same easily identifiable positive swing in Europe as they are having in the USA but – it looks like a turnaround is close.
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Commercial property investment for Serviced offices
