Friday, October 17, 2008

UK Commercial Property Returns Fall

Source : The Business Times, October 16, 2008

(EDINBURGH) Commercial property returns in the UK, Europe's largest market for real-estate investment, fell in the 12 months to Sept 30 at the fastest rate in at least 21 years as price declines accelerated.

The annualised loss on investments in offices, shops and warehouses was 18 per cent, the biggest since Investment Property Databank Ltd started tracking the market in 1987, the London-based company said in an e-mailed statement on Tuesday. September's 2.4 per cent loss was the worst monthly return this year.

Rents and capital values dropped after banks granted fewer loans to investors as the subprime mortgages market collapsed. Demand for commercial real estate was also crimped by job cuts in the financial-services industry.

'The signs of weakening occupier demand are now becoming clearly visible,' Ian Cullen, co-founder of IPD, said in the statement.

Capital values dropped 2.9 per cent in September, led by stores. That was the 15th straight monthly decline and it brought the drop for this year to 14 per cent.

The total loss on commercial property returns for the year, after taking rental income into account, is more than 10 per cent, compared with a 22 per cent slump in the FTSE All-Share Index and a 3.9 per cent return on UK government bonds. -- Bloomberg

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