Analysts predict commercial downturn-but the sector still has a firm place in market

Analysts predict commercial downturn-but the sector still has a firm place in market


Analysts have predicted that the commercial property market is set to continue to decline for the rest of the year and into 2009. A fall in demand for commercial properties has been noted as there has been a slow down in both the retail and construction sectors.

However looking at the financial market as a whole it is hard to see which sector wouldn’t be affected by the current economic slowdown. Commercial property is bound to face hard times as businesses don’t make the same profits as they did previously and recession fears are high. Commercial property will always have a place however, and for those who can weather the storm the other side of the crunch should be as prosperous in commercial as before. Mike Healy of CHL Commercial said: 

“There is no doubt that capital values have fallen in the commercial property sector since the growth years leading up to 2007 and many in the market believe a further five to 10 per cent fall is likely before the end of the year. However, in looking for the green shoots of recovery there are a number of indicators which can be deemed positive. Firstly, there is some evidence of improving yields in the commercial sector and we are able to see that this is probably down to the commercial market being less volatile than residential. The commercial market offers more stability for the property investor than residential given that renting is on much longer terms, for example, periods of five to 10 years rather than the six months we see with Assured Shorthold Tenancy.

 “The commercial property investor is looking at the opportunities within the sector over a much longer time frame and is essentially in the game for the long term. They are looking at the regular income stream over a period of time as opposed to the buy-to-let investor who has, at least in recent years, been switched on by the prospect of capital gain. This points to a much more stable and settled market and one which still offers sufficient opportunities for the investor. The fall in capital values has mean that we are now seeing prices much more closely aligned to a fair value which means that investors are looking at acquiring property which is not beyond the realms of realistic valuations – essentially they are more likely to be getting what they pay for. A sure sign of this is the increasing evidence that the professional commercial property investors are getting back into the market especially via property auctions which suggests a fuller recovery is not too far away.”

Lucy Trueick

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