14 Jan, 2008
Published: 10:58 Monday 14 January 2008
By: Lorna Bourke, Money Columnist
The decline in the value of commercial property continued with a
fall of 4.3% in December, according to property consultant CB
Richard Ellis's monthly index.
The decline accelerated in December following a 4.1% drop in
November. Values have gone down 11.9% since the onset of the credit
crunch, and 10.3% in the fourth quarter alone.
Total returns in December were -3.9%, increasing the negative
return for the whole year to -5.2%. The figures are significant
because the Ellis index (CBRE) values a significant proportion of
the properties in the Investment Property Databank index, the
industry benchmark, which is used as the basis for property index
derivatives trading and is next due for publication tomorrow.
Director Michael Keogh warned of further pain in the short term.
'The consensus and derivatives pricing is suggesting that there is
a further 10% drop in capital values still to come. The risk to
that is on the downside because it is unclear what will happen in
the occupier market,' he said.
'The UK occupier market has so far held up well but could come
under growing pressure as economic activity slows, retail sales
flag, and job losses emerge, not least in London's City
Keogh said the data indicated a difficult start to 2008 but the
recent aggressiveness of the correction would help the market to
stabilise towards the middle of the year as more bargain hunters
were drawn to the market.
'Considering the remarkably quick adjustment in pricing, with
values already down by almost 12% since mid-2007, and with the CBRE
Index now showing an all-property equivalent yield of 6.4% against
10-year gilts offering less than 4.5%, it may not be long before
more investors see value in the sector,' Keogh said.