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Commercial Property News
Latest IPF consensus forecast is the commercial property values and rentals will decline further
The outlook for commercial property values has significantly worsened in the second quarter of the year with a consensus forecast total loss for 2008 of -5.2%, down from -2.6% in March.
The downward trend pours cold water on fund manager predictions that the market will hit a floor in the latter half of 2008, said industry group Investment Property Forum (IPF). Consensus forecasts also suggested that rental and capital value growth will remain negative well into 2009.
The City of London faces three to five years in the red, a worse forecast than the rest of the country because of office oversupply and its dependence on the souring financial sector.
‘These markedly weaker figures than those reported in Q1 of 2008, reflect growing concerns regarding the wider economy,’ said IPF head of research Louise Ellison.
‘The forecast recovery shown for 2009 in the last two surveys now looks less certain. The improved total return figures reported for 2009 in the last survey have fallen back and, while still showing an improvement on 2008, are nonetheless weaker.’
Pricing was expected to fall 10.2% this year compared to the 7.8% predicted in March, while rents were expected to be 0.4% up, against 1.1% previously. In 2009, rental income was expected to fall 0.9% and prices to fall 1%, delivering a total return of 4.7% before hitting a healthier 8.2% by 2010.
City offices, hit by persistent concerns on supply and fears of financial slowdown, were expected to be offering total returns of -9.5% this year, down from -4.8%.
Michael Barrie, director of balanced property funds at Legal & General and manager of the L&G UK Property trust, said he was braced for substantially worse results, however.
‘We have factored in around -10% [total returns] in 2008 [compared to the above 5.2%] but picking up a little more in 2009,’ said Barrie. ‘There is still an impasse between buyers and sellers at the moment – buyers remain quite nervous. It is fair to say we are facing quite a downbeat year.’
The IPF surveyed property advisers and consultants, equity brokers and property fund managers for the survey.
The downward trend pours cold water on fund manager predictions that the market will hit a floor in the latter half of 2008, said industry group Investment Property Forum (IPF). Consensus forecasts also suggested that rental and capital value growth will remain negative well into 2009.
The City of London faces three to five years in the red, a worse forecast than the rest of the country because of office oversupply and its dependence on the souring financial sector.
‘These markedly weaker figures than those reported in Q1 of 2008, reflect growing concerns regarding the wider economy,’ said IPF head of research Louise Ellison.
‘The forecast recovery shown for 2009 in the last two surveys now looks less certain. The improved total return figures reported for 2009 in the last survey have fallen back and, while still showing an improvement on 2008, are nonetheless weaker.’
Pricing was expected to fall 10.2% this year compared to the 7.8% predicted in March, while rents were expected to be 0.4% up, against 1.1% previously. In 2009, rental income was expected to fall 0.9% and prices to fall 1%, delivering a total return of 4.7% before hitting a healthier 8.2% by 2010.
City offices, hit by persistent concerns on supply and fears of financial slowdown, were expected to be offering total returns of -9.5% this year, down from -4.8%.
Michael Barrie, director of balanced property funds at Legal & General and manager of the L&G UK Property trust, said he was braced for substantially worse results, however.
‘We have factored in around -10% [total returns] in 2008 [compared to the above 5.2%] but picking up a little more in 2009,’ said Barrie. ‘There is still an impasse between buyers and sellers at the moment – buyers remain quite nervous. It is fair to say we are facing quite a downbeat year.’
The IPF surveyed property advisers and consultants, equity brokers and property fund managers for the survey.
Wed, 18th Jun 2008