Commercial Property Crash

Most economists believe the outlook for the UK property market will remain strong whilst we are a Society of ‘under developers’. A lack of sizeable property development has pushed rents to an all-time high.

However, a sudden rise in business failures could put a dampener on the rising market. Rising interest rates will be the only true way to test the resilience of the commercial property market. In a slump or recession, like that of the 1980’s; people do lose their jobs, businesses fail, premises close, properties are repossessed and property prices fall.
B Mortgage companies do not seem to be too petered with the threat of a commercial property crash. To the contrary, mortgages companies are preparing to revolutionise commercial mortgages by offering Loan To Value up-to 85%. 85% Commercial Mortgages could be a catastrophic move if we saw a repeat of the 1980’s house price crash. Thus, confidence must be derived from the mighty banks and building societies that control so much of our hard earned cash!

Commercial Property Forecast

An investment company is comparing the market for commercial property to that of the 1989 crash. They predict the market will face a 20% correction over the net year and it is likely that the City of London offices will be worst affected.

The Company say people are pulling out of transactions and whilst the economics are different it is no better than 1989. Yields need to rise above their present rate of 5% to the 7% average.

The Property Index shows the market up by 4.6% resulting from an 8.1% return from offices with a flatline on retail and industrial properties. London accounts for half the office indeed and one fifth of the index as a whole.

The credit crunch will lead London into a storm, it is predicted, with a slowing of transactions and oversupply, for about a year. It is predicted that after this time there should be some great opportunities and prime office space will be at a premium.

Commercial Property Prices

The first half of 2008 is likely to bring an exaggerated price adjustment of commercial property.

The last two years have bought over priced property but now many will be undervalued and opportunist investors will rush to buy up any bargains.

The falling prices of commercial property fluctuate from sector to sector. Some areas have already settled but it will take the best part of next year for others to do the same.

Since the credit crunch many properties have been sold undervalue to landlords who have bid well below the asking price.