UK Office Property Values Fall 2.3% In April

Source : The Business Times, May 19, 2009

(LONDON) Falling rents helped to drive British commercial property values down a further 2.3 per cent in April, although the month-on-month rate of decline has slowed substantially, data showed on Friday.

Investment Property Databank (IPD), which compiles benchmark data used as the basis for trading in Britain's property derivatives market, said UK commercial property rental values hit a 16-year low in April, offsetting relief from the slowdown in falling values.

The index registered a 3.1 per cent drop in March.

'The demand shock has been so severe, given the breadth of industries affected by the downturn and the scale of companies downsizing, that office relocations and expansions have been off the agenda,' IPD research director Malcolm Frodsham said. 'Given the pace of rental adjustment to date, it suggests that when the wider economy does recover that the UK commercial property market will be well placed to recover from a low base.'

IPD said April's decline in values was the shallowest since August 2008, the month before the collapse of US investment bank Lehman Brothers.

UK commercial property is now on average 42.7 per cent cheaper to buy than at the peak of the market in June 2007.

Average office prices have fallen 42.6 per cent since then, compared with falls of 44.4 per cent for shops and 39.4 per cent for industrial and warehouse real estate.

IPD said UK commercial property generated a minus 17.9 per cent six-month total return in April, compared with a 1.9 per cent six-month total return for UK equities measured by the FTSE All Share Index.

Bonds, tracked by the FTSE UK Gilts Index (5-15 years), have returned 11.2 per cent over the same period. -- Reuters