Investment Property Databank has revealed that the value of UK commercial property fell by 5.6% in 2009. This was the third consecutive annual decline; following a fall of 26% in 2008 and 7.7% in 2007 the London based research body said.
This means that commercial property in the UK has taken a far bigger bashing at the hands of the international downturn than the residential sector has.
However, the commercial sector has seen a similar rebound to the residential sector, though it did wait longer to start: according to IPD December saw the fifth monthly gain in commercial property values, and the largest monthly gain IPD have ever seen at 3%.
This has undoubtedly been a strong rebound, but investors are saying that is all it has been; unemployment and lacklustre economic growth will weigh on values in 2010 they caution.
“There will be little if any capital appreciation in the second half of this year and the first half of 2011, said Gerry Ferguson, head of U.K. property at Edinburgh-based asset manager Scottish Widows Investment Partnership. “I wouldn’t like to see capital values rising inexorably, since that’s what got us into these problems in the first place.”
10 asset managers overseeing a combined 65 billion pounds ($106 billion) of commercial buildings throughout the U.K., forecast an average 7% growth in commercial property values for this year in a Bloomberg survey.
IPD also reported that average gains from commercial property in the UK had been 2.2% for 2009, including rental income, and said that gains were much higher when debt was counted. IPD compiled its December index using appraisals of 3,368 properties across the U.K. worth an estimated 27.7 billion pounds.
Meanwhile, Christie + Co’s annual Business Outlook report said that restaurant values had fallen 18% in 2009. The firm said that the fall had been caused by the falling numbers of people eating out, and because the larger operators had — went into a state of hibernation — been focusing on paying down debt, raising new funds and streamlining their operations.
2010 could see improvement in the restaurant sector, with mergers from some of the established local operators, who had taken advantage of the bigger companies buying freeze to make small expansions. Christie + Co’s said:
“The current mood in the market is one of cautious optimism as we head into a recovery, with like-for-like sales continuing to show resilience and established operators set to return to the market in earnest to seek out opportunities this year. The recent increase in VAT and continued rise in youth unemployment is set to put further pressure on operators.
“Despite this, it is hoped that the steps taken by the majority of operators over the previous 12 months and the continued emergence of new concepts and entrepreneurs will enable the sector and transactional activity to remain resilient in the year ahead.”
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