Latest reports seem to suggest that the US commercial property market is starting to climb. The US economy grew at a 2.8% annual rate in the fourth quarter of 2010, helping boost demand for serviced offices, retail and industrial space.However, some fluctuations will remain as the share of troubled transactions continues to be elevated.
Whilst, overall, this is obviously good news, we must remember, that during the commercial real estate boom, many investors bought property with high levels of debt. The recession led to rising vacancies and falling values, making it difficult for landlords to refinance. The delinquency rate, on loans packaged and sold in American commercial mortgage backed securities, rose to a record 9.2% in February of this year. It is obvious that most demand drivers for commercial real estate, have reached rock-bottom, including office-using employment.
The underlying demand for commercial real estate has started its turnaround, but we are not going to see much price appreciation until the slack, in supply is taken up. However, according to the latest figures from Co Star Group, a real estate data service based in Washington, values were up 11% from January 2010. So it is looking very positive for USA commercial property at the moment.
In Europe, however, the average fall across all commercial sectors has been 6.02%. And whilst falls on the scale of 2010 are not expected, Cushman & Wakefield’s, January business report on the UK property investment market, anticipates declines in some parts in the first half of 2011.
The report suggests that the initial re-pricing of the market was driven by a lack of quality products and an increasing awareness that pricing had moved too far. The report goes on to say, ‘the current stabilisation, reflects the fact that pricing moved back a long way in a short space of time and we are seeing a pause for breath as the market absorbs the changes seen.’
This basically means, in Europe, commercial property simply does not have the same easily identifiable positive swing as they are having in the USA. But, the good news is, it appears as though a turnaround is on the horizon.
Previous Post
New Appointment At Commercial Property Provider Landmark
