The IPD capital growth index results have been released and they show a month-on-month decline of 0.4 percent in April. If the figures are rounded out there is effectively no change. Offices were the best performing sector and retail was the worst which continues the established trend in the market. According to Knight Frank, the latest UK Market Outlook index is expected to rise in the coming months.
In London, the office market is seeing growing interest from the technology sector. Amazon has recently leased a 190,000 sq ft building on Holborn Viaduct. Salesforce.com has also established a presence by renting space in the Heron Tower.
In 2013, total investment in commercial property in the United Kingdom has reached £13.8 billion. During the same period last year, investment was £13.3 billion although the volume of activity was strong in Q1, it decreased in Q2.
As interest rates return to normal levels, more commercial property loans are expected to go into default. Even if lending improves next year conditions may take a hit in 2015. Banks may sell or force the sale of assets next year, to clear the decks for the next wave of repossessions.
Asset sales are not the only way for banks to reduce their mountain of debt. As the economy improves, more money will likely flow into private equity and opportunity funds. More money will then flow into buying debt at a discount from the banks.
Before the economy will see interest rates rise, a sustained economic recovery will need to take place. This step will generate a wave of new property investment.
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