As wealth flows into the central London commercial property market, there is room for buyers who are specifically interested in purchasing secondary market properties. They need to be very careful in making their choices however.
According to Marcus Langlands Pierce, manager of the UK Property unit trust, the fact that there are plenty of forced sales and few buyers means prices are currently sitting at previously unheard of rates in this segment of the market. Buyers should make a point of practicing their due diligence before making a decision based solely on numbers, though.
He points out that prices are uncertain at present, and that it is hard to predict the price of a sale. The market is currently seeing 10 and 12 per cent yields and in a case where there is a forced sale, there may even be a 15 or 20 per cent yield. These types of double-digit yields are out of the norm, and are numbers that Langlands Pierce has not seen during the course of his career.
As an example, he points to an office building in Birmingham that was being offered for sale at a yield of 15 per cent. The property had seven years left on the lease. This is only one example of the bargains currently available to buyers in the secondary market.
A commercial property investor would not be able to buy a site and put up a property for the same kind of money. A long-term investor can see there is value emerging in these markets, but anyone who is looking outside of London needs to keep in mind that the market has been affected by less than optimal occupancy rates. Low prices are only one consideration; investors need to consider whether they can attract occupiers to the properties for the long term as well.
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