British commercial property prices down 27% in 2008

Last year, the British economy was one of the hardest hit by the now evident commercial property (CRE) implosion. Prices fell 27.1% in 2008, including a record 5.8% in December alone, suggesting the trend is accelerating. I mentioned in my “Top Ten Predictions for the 2009 global economy” that I believed commercial property writedowns would be numerous because of securitzation. Ireland, the U.K. and the U.S. are tops on the list for a CRE correction. You should note that this trend is very much related to declines in the real economy as retail is where the greatest problems now reside.

Values fell by a record 5.8pc in December, meaning the overall decline for the final three months of the year was 15pc.

The commercial property market has been ravaged by the reduced available of credit and falling demand for new space as the economic downturn leads to businesses collapsing or downsizing.

A recent report by investment bank Close Brothers warned that UK banks could be forced into another Government bail-out because of the amount they have loaned to the troubled commercial property sector.

From the peak of the market in July 2007, values have now fallen 35.5pc, described by the IPD as “totally without precedent”.

Keith Steventon, head of research at Atisreal, said the size of the 5.8pc drop last month suggests the bottom of the market is some way off.

“Not only is it a record but the rate of decline continues to accelerate, which suggests that not only has the market not found its floor, but that the floor is still some way off,” he added.

According to the figures, retail property was the worst hit sector, with a 2008 fall of 28pc. Office properties lost 27.2pc and industrial 25.5pc.

Mr Steventon added: “What is particularly striking is that the decline is fastest in retail, implying that valuers are very conscious of the poor prospects for retail.”

Sources
Commercial property values plunge – Telegraph