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Commercial Property News
Commercial Property values look set for a double dip as economy slows
UK commercial property values slid by 1% in April, extending the market's slide from last summer's bull market peak to almost 17%, data from Investment Property Databank (IPD) showed yesterday.
The rate of decline in capital values continued to slow after a nine-month run of falls but provided little comfort for real estate investors because rental growth had begun to feel the heat as the economy slowed, according to IPD.
"For those investors who thought we had reached the bottom in the first quarter of 2008, these numbers will be unsettling at best," Malcolm Frodsham, IPD's research director, said. "Flat rents over the month raise the spectre of a double-dip."
IPD's benchmark monthly data is used as the basis for property derivatives trading and was based on a sample portfolio of 3,918 properties with a total value of £45.7 billion.
The report showed the average initial yield on UK commercial property rose to 5.48% in April from a low of 4.57% last summer.
Property yields measure rental income in relation to capital values and enable comparisons with markets, such as 10-year UK government bonds which yield around 4.83%.
Total returns, which combine rental income and capital growth, fell last year for the first time since 1992 -- a loss of 3.4% after gains of 18-19% in each of the previous three years, according to IPD's bigger annual UK all-property index.
CB Richard Ellis, one of IPD's biggest data contributors, said this week UK commercial property values fell by 0.7% in April.
The rate of decline in capital values continued to slow after a nine-month run of falls but provided little comfort for real estate investors because rental growth had begun to feel the heat as the economy slowed, according to IPD.
"For those investors who thought we had reached the bottom in the first quarter of 2008, these numbers will be unsettling at best," Malcolm Frodsham, IPD's research director, said. "Flat rents over the month raise the spectre of a double-dip."
IPD's benchmark monthly data is used as the basis for property derivatives trading and was based on a sample portfolio of 3,918 properties with a total value of £45.7 billion.
The report showed the average initial yield on UK commercial property rose to 5.48% in April from a low of 4.57% last summer.
Property yields measure rental income in relation to capital values and enable comparisons with markets, such as 10-year UK government bonds which yield around 4.83%.
Total returns, which combine rental income and capital growth, fell last year for the first time since 1992 -- a loss of 3.4% after gains of 18-19% in each of the previous three years, according to IPD's bigger annual UK all-property index.
CB Richard Ellis, one of IPD's biggest data contributors, said this week UK commercial property values fell by 0.7% in April.
Fri, 16th May 2008