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Commercial Property News
Cushman & Wakefield say commercial property buyers and sellers can't agree prices so volume is 45% down
Cushman & Wakefield in it's Q2 analysis of the UK commercial property market noted that transactional volumes stabilised somewhat in the opening quarter - falling less than 4% from their levels at the end of 2007 - but still stood some 45% down on the same period a year earlier. A lack of evidence is still masking exactly where the market is standing, and this has actually held the market back from finding its floor as buyers and sellers are not yet in agreement on pricing.
Total direct investment volumes amounted to £7.6 billion in Q1 according to Property Data, with institutions the main vendors and property companies and overseas players the most active purchasers.
Whilst many accept that capital values may fall further this year, there is a growing view in the physical market that the worst of the price correction is over and that current derivative pricing may be overstating the potential fall.
In the first 4 months of 2008, the three main London commercial auction houses have sold 358 properties, raised £257.4 million and have had an average sales success rate of 82%. In the same period in 2007, they sold 617 properties, raised £525.9 million and had an average sales success rate of 86%. Clearly therefore, whilst average sales success rates have remained fairly static, mainly as a result of auction houses being more selective in the properties they are offering, both sales volumes and the number of properties being offered for sale have dropped significantly in 2008.
This trend has accelerated in the second quarter, with early results in May indicating a fall in success rates for secondary stock. At the May C&W auction however, a catalogue dominated by bank sale & leasebacks, high success rates were again achieved (averaging 82% to date) albeit that a modest further outward shift in yields was noted. Whilst there still appear to be plenty of private investors willing to invest in the commercial market, funding has become a major issue for private investors, with loan to value ratios down and banks becoming more selective as to whom they are lending to and which covenants they are lending against.
Total direct investment volumes amounted to £7.6 billion in Q1 according to Property Data, with institutions the main vendors and property companies and overseas players the most active purchasers.
Whilst many accept that capital values may fall further this year, there is a growing view in the physical market that the worst of the price correction is over and that current derivative pricing may be overstating the potential fall.
In the first 4 months of 2008, the three main London commercial auction houses have sold 358 properties, raised £257.4 million and have had an average sales success rate of 82%. In the same period in 2007, they sold 617 properties, raised £525.9 million and had an average sales success rate of 86%. Clearly therefore, whilst average sales success rates have remained fairly static, mainly as a result of auction houses being more selective in the properties they are offering, both sales volumes and the number of properties being offered for sale have dropped significantly in 2008.
This trend has accelerated in the second quarter, with early results in May indicating a fall in success rates for secondary stock. At the May C&W auction however, a catalogue dominated by bank sale & leasebacks, high success rates were again achieved (averaging 82% to date) albeit that a modest further outward shift in yields was noted. Whilst there still appear to be plenty of private investors willing to invest in the commercial market, funding has become a major issue for private investors, with loan to value ratios down and banks becoming more selective as to whom they are lending to and which covenants they are lending against.
Tue, 1st Jul 2008