Commercial Retail Property Price Correction Forecast For 2011
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It would be an understatement to say that the commercial retail property market has gone through a bumpy ride the last few years. The retail sector has unfortunately endured some of the worst of the pain seen in the sector, with commercial property real estate valuations plummeting by over 40% up until July 2009, according to the IDP Index.
The last twelve months has seen investors returning to certain sectors of the commercial retail markets, resulting in a patch recovery. But the outlook for the retail sector is darkening again, in tandem with prospects for the general economy.
The commercial retail market is sensitive to the wider consumer market, and there are many negative factors coming into play next year that will knock consumer confidence back. First the budget has slated VAT to rise to 20% in January next year, which will certainly reduce the consumer's appetite for goods. Then there is the impact of the increase in Capital Gains Tax, which will affect particularly the sale of higher price ticket items. Finally more people are bearing the burden of heavy debt and entering into IVA's, bankruptcy orders and debt relief arrangements. This reduced flow into the top end of the economy is certain to trickle down to the rest of the retail sector.
Finally, there is the expected widespread impact of the severe cut backs that the government is undertaking, to bring the deficit back under control. Because of the high proportion of the workforce is employed in the public sector, any reduction to the public sector payroll is bound to have negative effects on the total spending of consumers. So the demand side for retail tenants is not looking bright at all.
Even before any of these factors have come into play, the commercial retail property sector is showing signs of stress- for instance, in the Estates Gazette, reports like this are increasingly common:
"More than £200m of retail park sales have stalled over the past month as increases in capital values continue to soften (Estates Gazette, 19 June 2010).
There is also a worry that recent reductions in insolvency rates for retailers are down to clever ways of using Company Voluntary Arrangements (CVA) to restructure costs. Failing retailers have used CVAs to off-load badly performing stores, without losing control of their companies to the detriment of landlords. Often property owners are left with no recourse to such retailers to pursue them for unpaid rent. And as the value of their commercial retail investments has fallen, owners face the prospect of breaching their banking covenants, which could lead to them facing repossession.
So, increasingly, it is looking like a good time to sell commercial retail property. If you are thinking of putting your commercial retail premises for sale, one way of hitting the market fast, with a minimum of hassle, and a good valuation, is to sell to SellMyCommercialProperty.
SellMyCommercialProperty are a company with access to substantial lines of finance. We are looking to make commercial retail investments, and so can give you the equity from your premises fast, and at a fair market price.
Our experienced professionals operate country wide, and can make an initial assessment and valuation within 48 hours. So, we can release the value of your commercial property much more quickly than going through an agent. Give us a call today, and we can explain how SellMyCommercialProperty can put you ahead of the softening commercial retail market.
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