Property group insolvencies could reach 1,600 this year

Property group insolvencies could reach 1,600 this year



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It has emerged that the number of property companies facing severe financial difficulties has soared since the end of last year.

According to rescue and recovery specialist Begbies Traynor, 304 property groups have been identified as troubled or at risk of insolvency by the “red flag” early warning system. In the third quarter of 2008, 185 companies were said to be struggling.

 

The companies are said to be the middle and lower market players rather than the big groups that have recently launched rights issues, such as Land Securities, British Land and Hammerson.

 

The senior London partner of Begbies Traynor, Nick Hood, stated: “In the past three months alone, 171 property companies have started insolvency proceedings, and we believe these numbers will rise sharply as we progress through 2009 and into 2010. We estimate that the number of insolvencies in this sector could reach between 1,200 and 1,600 in 2009.”

 

The bleak state of the commercial property market – prices dropped by another 3.5% in January, in addition to the 27% drop in 2008 – has been blamed on falling demand for office space as unemployment figures soar and lending restrictions continue. 

 

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