Commercial Property Prices Rebound

The latest report from the Investment Property Databank, which was published this Friday, suggests that the values of UK commercial property have finally seen the smallest decline in the course of 2 years; however, decreasing rents are still expected to put pressure on property values. The Investment Property Databank (IPD) index, which is commonly being used for the calculation of UK property derivatives market, showed that commercial property prices fell by a mere 0.13% in July 2009. The latest figure brought total commercial market decline to 44.2%. IPD report stated that UK commercial property initial yields declined to 7.87% with yields from malls’ and offices’ rentals falling to 7.59% and 8.09% accordingly; the figures are said to have emerged as the result of the slower pace of decrease in prices and rents. Let us remind that last week we have reported CB Richard Ellis, a British property broker and a contributor to the commercial property index, claiming that British commercial property values increased by 0.2% in July 2009. Although the latest news suggest that the recovery of the British property, commercial property market in particular, is to be expected soon, many industry experts are determined that its revival is still under question because of the overall weakness of the UK economy. IPD specialists also do not take the market revival for granted. For instance, Mr. Malcolm Frodsham, research director at the Investment Property Databank, says that investors have to be careful not to put all their hopes in the numbers of 1 month. He added that positive rental growth is still to be awaited, which fact is expected to put further pressures on property values. Another finding from the IPD report demonstrates a 0.58% decline in average office rents, which is said to have been caused by decreased demand for office and retail spaces. At the same time, prices on retail property increased by 0.5% this July, which compares to a 0.29% and a 0.24% fall in office and industrial property prices.