According to the latest report published by IPD UK, commercial property values in UK rose by just 0.1% in January 2011. This is statistically the equivalent to standing still.
This slight increase only applied to retail and industrial properties; as for office spaces, the growth was flat.
Commenting on the gloomy figures, Mr. Tily of Investment Property Databank, said, ‘the commercial property market could continue to remain lacklustre over the months to come, masking a polarisation of market performance by geography and asset yield profile.’
The report also showed that annual growth in capital values fell by 0.9%, from 6.9% in December 2010 to 6% in January 2011. Income growth amounted to 0.6% in the first month of the year of 2011.
The index for January was compiled on the basis of analysis of 3,630 properties worth £33 million in total.
In the opinion of Mr. Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS), commercial property in Great Britain could face significant challenges this year.
Studies show that Central London office rents will rise further. However, the revival of the medium-term development pipeline should ease occupiers’ fears about being stuck in unsuitable premises. Together with the faltering economic recovery that we expect in 2011, this should dampen leasing market activity.
Rather than 10%, we now think IPD City and West End rental values will grow in 2011 by about 5%.
One would think that, with demand for office space falling, one would see a corresponding fall in rental prices, but this would infer reason on the property market and that doesn’t seem to be happening at the moment. As with residential sales, people continue to overcharge in the vain hope that their spurious asking prices will eventually become a reality.
So with this in mind, the commercial property and serviced office market, despite growth, remains an uncertain sector.
