Experts warn of worsening outlook for commercial property

And the panel of experts, who sit on the advisory board of Reita, unanimously said there would be no rise in non-prime or regional property values over the next 12 months, with almost one in four (23.5%) predicting values would remain flat, and more than two-thirds (70.6%) predicting a fall.

Across the whole market, two-thirds (64.7%) said the yield-spread between primary and secondary properties would increase.

The quarterly survey also found little optimism for speculative development.

Just under two thirds (64.7%) felt it would be at least another year before speculative development outside of London made sense again.

By contrast, the prospects for the capital were seen as stronger. More than half of respondents (52.9%) predicted that values in prime central London would rise a small amount, against 12% who thought there would be a small fall.

On the question of banks reducing their exposure to commercial property, more than twothirds (70.6%) predicted “increasing use of imaginative arrangements to work out assets without recognising losses” with the remainder expecting a “trickle of assets coming onto the market as banks shy away from recognising losses”.

Peter Cosmetatos, Director of Policy at the British Property Federation, said: “Outside of the strength of central London there is real cause for concern that government spending cuts will contribute to either zero growth, or even a fall in commercial property values over the coming 12 months.

Cosmetatos also warned that the spending cuts will result in a widening of the North-South divide.

“Whilst prime commercial property in London and the South East looks fairly robust the picture is very different in the North. Public spending cuts will result in further job losses and in turn less demand for commercial property, particularly for those industries that are almost entirely reliant on public sector spending.

“It’s not a good time for speculative commercial development right now – outside of London there just isn’t the appetite to build without a formal commitment from the end user.”

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