» What Does 2011 Hold For Commercial Property?

What Does 2011 Hold For Commercial Property?

Although I would like to think of myself as an optimist, I am at a loss to find anything positive to say about what is in store for commercial property next year.

The streets are still filled with doom and gloom which is being fuelled by streams of negative economic data.  Interest rates, inflation, consumer spending, house prices, unemployment, banking regulations, stamp duty, confidence levels, government spending cuts, bank lending, tax regimes etc are all pointing to a double-dip recession which will hit commercial property values hard.  

As banks continue to restrict loans which individuals and businesses urgently need, we will continue to see businesses fail.  This will lead to tenants being unable to pay their rent and without an income, landlords will be unable to pay loan interest payments.  Banks will then step in and repossess properties which they will need to sell.  As more property comes onto the market, prices will fall, which will be exacerbated by buyers being unable to acquire these properties as they will be unable to raise debt.

In the past, people have called us to sell us their commercial properties.  Nowadays, they call with the same end goal in mind but instead of seeing us as a buyer of property, they see us more as a solution to their financial problems.  Where they are unable to borrow money from banks, which will continue to be the case in the foreseeable future, they are starting to think of other ways to raise equity.  Some are looking to sell their businesses, which is becoming more and more difficult in the current climate, and others are considering selling their tangible assets, such as their commercial property, and renting it back.  Sale and lease-backs will be a popular cash raising exercise next year which will assist businesses with liquidity but won’t necessarily benefit the market as increased sales will force prices down.

Therefore, I think we will see more property coming to the market next year and in order for vendors to offload their shops, offices and industrial units, prices will have to fall.  I also think the smaller properties of sub £1m will suffer the worst since they only appeal to private buyers who at the moment do not have the cash to buy them.

To stay abreast of latest commercial property market news visit Jason Werth’s sell my commercial property blog

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