CBRE Report: Bottom Drops Out of Commercial Real Estate

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Bottom drops out of commercial real estate

If you are a commercial property owner who was lucky enough to regain some lost value in 2021, good for you. Chances are that you lost it all again in 2022. According to a new CBRE report released on 9 January, the bottom dropped out of the UK commercial real estate market last year.

Some analysts are predicting that it will be all over in just a couple of months. Others are saying that there still is plenty of room for greater losses. Regardless of who’s right, recovery is going to take a while once it begins. The chances of UK property values returning to pre-COVID levels at any point within the near future are slim to none.

A Complete Turnaround

The CBRE Monthly Index for the week of 9 January revealed that, on the whole, commercial property values fell by more than 13% in 2022. Likewise, annual returns from commercial properties were down just over 9%. The data points to a complete turnaround in just the space of a year.

In 2021, the CBRE index showed total growth of 13.8%. Returns increased nearly 20% during that year as well. In essence, the 2022 downturn wiped out all the gains made the previous year.

Hardest hit was the industrial sector. It lost 21% in capital value and just over 18% in total returns. Retail was also off, but not by nearly as much. No matter where you look though, commercial property in the UK is suffering.

The Root Causes

By now you might be wondering about the root causes of it all. Truth be told, you already know the big issue: inflation. When inflation gets out of control, it causes the prices of everything we buy to surge. The more we pay for the necessities, the less we have to spend on other things. The domino effect kicks in, and the entire economy suffers.

Persistent inflation has been a problem in the UK for more than a year. It has been a problem worldwide as well. But what caused the inflation? A combination of three things: COVID shut-downs, government support during those shut-downs, and increased government spending designed to get the economy going again after COVID.

By all accounts, all three moves by the government were ill advised. Each one had a compounding effect on the other two and, as a result, the economy shrank while the government continued spending too much money. The only thing that can result from such a scenario is runaway inflation.

Your Future Is Now

It is quite possible that the commercial real estate market has finally bottomed out. Recovery could begin sometime later this year. But it is also entirely possible that property values and returns will continue falling for the next several quarters. No one really knows for sure.

The one thing we do know here at Sell My Commercial Property is that your future is now. What do we mean by that? We mean that your commercial property has a defined value today. We can make you an offer based on what we believe your property is now worth. You can take that offer and relieve yourself of that distressed property.

In the future, it is quite possible that your property will be worth significantly less. It could also be worth more. Again, no one knows. Either way, you will have to take a risk. Our point of view is that it is safer to get what you can now rather than risk getting even less down the road. But it’s your call. Let us know if we can help.