VALUING commercial property has been a somewhat problematic activity over the past two years, with limited transactional activity to support valuers’ opinions. Declining values have been the result of market sentiment, availability of finance and declining occupier demand.
However, some normality is returning as activity increases.
The prime sector, for example, has witnessed a significant improvement in values over the past three months.
A combination of both improving market sentiment and the willingness of a handful of banks to start lending again were the key drivers.
In Liverpool, for example, we have seen an increase in the number of banks agreeing to provide finance, alongside an increase in transactions over the past three months.
The prime market, however, is still very much the domain of foreign funds and the super-rich.
Furthermore, the definition of what is prime among such buyers is now expanding – reducing the likelihood of fire sales.
And this is reducing the likelihood of fire sales.
Sellers will emerge, however, only when there is a market for the product they wish to trade, at what they consider to be the optimum level.
In the meantime, buyers must either accept lower yields to acquire prime property, or bite the bullet and enter the riskier secondary or development markets.
In the case of secondary stock, the banks are generally taking a case-by-case approach, and where in-house management is not viable, they are seeking to dispose of assets in a controlled manner.
For developments, there are plenty of stalled schemes while demand for speculative development within the North West is yet to return to a tangible level. This will undoubtedly result in a shortage of stock in years to come.
The availability of debt remains the key to re-opening all sectors and levels.
So we are back to the enduring question – when will the banks start lending again?
For many banks, January marked the beginning of a new financial year, so some may have opted to clean up their loan books in order to make a fresh start in 2010.
As a result, this could create buying opportunities for those with cash ready to go.
