UK Commercial Property Market Reached Inflection Point

The commercial property industry agents are now all talking “inflection point” – the new phrase meaning that the British market has finally (after 2 years of decline) seen increased interest in such commercial property units as shops and offices, which in its turn signals the recovery of the market. Let us remind that in 2008 the British investment market followed the suit of Lehman Brothers - it collapsed. Limited credit availability and consumer confidence aggravated the situation, and commercial property values fell by as much as 14.4% in the first quarter of last year and stood at the level of 45% below that of July 2007. The economic crunch had a drastic effect on some of the leading UK banks, funds, and individual entrepreneurs. Yet, the evidence from the past few months suggests that UK commercial property market is set to recover soon not only due to internal factors, but also to external. Those are not only British investors who demonstrate increased interest in commercial property, but also foreign ones – willing to take advantage of the weak British currency. For instance, Canary Wharf has recently received investment from China, whereas South Korea expressed its intentions to purchase some landmark London properties worth a min. of £150 million. In August, we have already reported that according to the information revealed by the Investment Property Databank, the decline in commercial property values has slowed significantly, which in its turn caused rises in property stocks with Land Securities alone witnessing an 80% increase since March 2009. However, commercial property industry professionals are not 100% certain that the current improvement is sustainable. As such, Mr. Harm Meijer from JP Morgan says that the current increase in commercial property values seems rather fragile as it is not being supported by a growing number of job sites, nor rents recovery, nor credit availability. He adds that governmental measures, such as artificially lowered interest rates and stimulus packages will not “hold” the market up forever. Yet, the major concern of industry specialists is the rental market as it is said to fall by 20.5% and 14.4% in 2009 and 2010 accordingly.