"Buyers who can obtain finance are reflecting the increased cost of borrowing in their bids which is further driving commercial property prices down," he said. "Others are waiting as they are fearful of buying early in a market which they expect to fall further."
However, Cullimore, who advises banks, developers and owner-occupiers on property values, said the last few months had seen renewed activity from buyers who wanted to snap up quality properties before an anticipated investor rush when the market bottomed out. Three Leeds office blocks were placed in solicitors’ hands in December.
"These buyers’ view is that if a good prime property comes available, they will buy it, even knowing that values are likely to fall further, as they may not get a chance to buy a block of the same quality again and it will provide an income through the rent.
"There are also buyers who do not require finance and the current market, where there can still be decent returns, is looking attractive to them as interest rates continue to fall and equity markets remain depressed as these are hitting returns from bank deposits and shares."
The result of these factors, said Cullimore, was a "flight to quality".
"Whereas two years ago virtually any commercial property was considered a good investment, key criteria such as location, quality of accommodation, the covenant provided by the tenant and the prospects of the property being let quickly if it becomes vacant, or easy to sell, are more crucial than ever before," he said.
"Those banks which are lending are looking to loan only on the basis of these criteria and so this is what purchasers are seeking. The quality of the income stream from a property and its ability to service the debt is of paramount importance for banks which are less concerned about falling values if they are still receiving re-payments and interest.
"There is a feeling that purchases made now on the types of properties the banks will support will make a significant profit when the market returns. There is always a winner!"
The flight to quality has resulted in a widening gap between investment yields on prime and secondary commercial property stock.
"In recent years this gap had narrowed significantly due to the sheer weight of money seeking property," said Cullimore.
"This resulted in purchasers not ‘pricing-in’ the risks and uncertainties often associated with secondary stock. As bank lending, and the minimisation of risk in a tougher environment, is leading buyers to seek quality, this gap is widening again with only prime property producing a steady income return and secondary stock expected to fall by more than 20% in capital value in 2009."
Property owners, he said, were not generally selling unless forced to.
"Instead they are working at managing existing properties to maximise the income stream and the long-term security of the income. With more businesses expected to fail, tenants’ financial strength needs to be monitored to head off any problems before they happen."
So what will lead to an upturn in the commercial property market?
Cullimore said: "As with much of the economy, the key is confidence and liquidity. The banks need to have the confidence to start lending again at sensible levels, although no-one is expecting, or asking, for the same levels of availability and pricing of debt as seen three years ago, and purchasers need confidence that values will not significantly fall further.
"This is all also tied in to the wider recession with investors worrying about the financial strength of their tenants. No one can yet see what the future holds but investors are slowly returning to the market and, if the economy starts to turn for the better in the next nine to 12 months, we may see a gradual but solid recovery starting late in 2009."
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