UK commercial property values continued to fall in the first quarter of 2012. The latest figures show the seventh consecutive monthly fall since the beginning of the downward trend in November last year.
The figures are revealed in the UK Monthly Property Index published by market analysts Investment Property Databank (IPD). They show that commercial property values have fallen by 1.6 per cent over the period in question and by a cumulative 35.3 per cent since the beginning of the global credit crunch in 2007. Furthermore May saw the steepest monthly fall in the current decline.
Uncertainty caused by concerns over the outcome of the Greek elections is one factor affecting market confidence, the report states, but the difficulties of re-financing continue to apply downward pressure.
A breakdown of the figures into categories shows that retail commercial property saw the biggest fall in value, particularly units in shopping centres. Offices and industrial property followed close behind. In addition the report shows that there has been little change in rental values across all categories.
However it isn’t all bad news with figures showing that returns in London remain resilient. Values in London offices in the City and West End rose by 0.9 per cent and 0.3 per cent, while the value of Central London retail property grew by 0.9 per cent.
Phil Tily, Managing Director of IPD UK and Ireland believes that this should provide the industry with some optimism. He said; “The fact that London can continue to grow, even in such difficult times, lends cheer to an otherwise challenged marketplace.”
The IPD UK Monthly Property Index is based on a sample of 3,602 properties with a combined value of £33.4 billion and covers the period to the end of May 2012.
In a separate report Ed Stansfield, the chief property economist at Capital Economics, has predicted an upturn in new commercial property development in London. He believes the prospects for new developments are looking better than they have for some time despite ongoing economic difficulties.
“It does seem as though developers are pressing ahead with projects – they are not pulling back, deferring and delaying,” he said. This should result in a greater supply of offices and other commercial properties in the capital although this could have a downward effect on rental values Mr Stansfield added.
Meanwhile market analysts at BNP Paribas Real Estate share the optimism surrounding future development although they point out it is still below average. They also point to an increase in commercial property investment in London with Middle East investors leading the way.
