The numbers for UK commercial property values are in, and the market is down by 2.0 per cent in the first six months of 2012. Austerity measures in the country and in Europe were the reason for the negative growth. The lone bright spot on the property radar was the office sector.
The office market in Central London grew by 1.8 per cent, and the retail sector was up by 2 per cent during the same period. Offices and high street retailers located outside of the South East are down 4.8 per cent and 5.2 per cent, respectively. Regional shopping centre values have fallen by 6.3 per cent in the first six months of the year.
Rents were flat in June. Over the past six months, the average rent fell by 0.1 per cent for all property levels. The retail sector was especially hard hit, and rents fell by a further 0.4 per cent across all types of establishments.
Even though the latest news can be interpreted as discouraging, commercial properties are still a viable investment option when considered in light of other products, which are much more volatile, such as equities. As long as the property is occupied by a tenant, it is producing an income for the owner. This fact makes investing in commercial property an attractive choice, even during times when the market is flat or negative for property values.
Investors will need to exercise good judgment when choosing a property to buy, but they would need to consider any opportunity carefully before opening their wallet. Any property purchase would have to be made with the view that the property will be held over the long term, since it may be some time before property values bounce back to pre-recession levels throughout the UK.
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