Commercial property values fall says survey

Jul 2 2008 by Tony McDonough, Liverpool Daily Post

UK COMMERCIAL property values in the prime and secondary markets have dropped by an estimated 10% and almost 14% respectively over the past 12 months.

The figures were revealed in a survey carried out among property investors by Investec Private Bank’s structured property finance division.

Almost one in five (18%) of those interviewed estimated that secondary valuations have dropped by as much as 16-20%.

In terms of assessing what will happen to UK commercial property valuations over the next 12 months, 39% of respondents believe they will continue to fall throughout the year but the majority (57%) think that after falling in the first part of the year they will begin to stabilise.

When asked to predict valuations in high end residential property over the rest of 2008, 17% of respondents defied the doom and gloom by forecasting an increase. However, the majority (53%) believe they will fall and 30% think they will remain the same.

Paul Stevens, of Investec Private Bank’s structured property finance team, said: “The correction in UK commercial property valuations was under way well before the credit crunch started last August and the research demonstrates how the impact has been greater on secondary rather than prime property.

“However, this study suggests that most investors are willing to call the bottom of the market this year and this would explain why such a high number are either maintaining their exposure or looking to increase it. The key will be how quickly the availability of senior debt picks up.”

According to the research, one in four property professionals are planning to increase their exposure to the UK commercial property market over 2008.

In May Investec published research which found that 86% of property professionals believed that worsening UK economic conditions would see a higher number of defaults.

Of these, 31% believed that defaults will increase significantly.

Despite rising defaults, 83% of respondents remained optimistic that banks would continue to lend to property investors, on a restricted basis.

tonymdonough