UK commercial property owners have cause for concern as values continue to drop in the face of the European debt crisis.The Investment Property Databank, which has been tracking developments in the industry since 1971, has released figures indicating that the value of warehouses, shops, and office space has dropped 0.7 percent in the first quarter of 2012.
On the face of it, this may not seem like a huge amount, but when you consider that the latest dip comes directly on the heels of commercial property values sinking 31 percent below the last peak in the market, which was in September of 2007, this news is cause for alarm. The current slump for commercial property holders is twice as significant as the one which occurred during the recession of the late 1980s. The market did recover, with values returning to 85 per cent of their pre-recession values within five years. The current slump affecting commercial property is not in the same league and is the worst downturn since the Investment Property Databank index began.
The main reasons the UK has fallen back into a recession can be linked to a construction slump and a lack of business demand. The only bit of good news on the commercial property front is for retail property owners in London’s West End district, where values are higher than 2007 levels. Consumers from China and Russia are spending money in shops on Bond and Oxford Streets, which is giving the coin in store owners’ pockets a healthy (and most welcome) boost. Property values in the area have risen by four per cent.
Commercial property values in the next best sector of offices located in the West End are a full 16 per cent below their 2007 levels. North West offices were the worst performers, with a drop of 46 per cent from the peak of 2007.
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