Commercial Real Estate - Is the Market Signalling A Sell?
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The commercial real estate market has been through one of its most turbulent periods over the last half a decade. After a peak in 2007, commercial property real estate valuations as a whole fell by over 40%, up to July 2009, according to the IDP (Investment Property Databank) Index.
There has been a limited recovery, of commercial real estate values over this last year, which has been partly explained by signs of economic recovery, as well as a slight easing of credit conditions. It is also true that some sectors did see an influx of cash from commercial real estate investment funds returning to the market. But this has been regionally focussed- the rental expectations outside of London have remained on balance negative, according to the latest RICS UK Economy & Property Market Chart Book August 2010.
So what is the outlook for the commercial real estate market? Many reports are not optimistic - for instance the IPF Forecast report states that:
"The dip in capital values next year is now predicted to be worse than previously expected. The quarterly survey shows that all sectors, except West End offices, have seen downward revisions to capital value growth forecasts. Standard shops are expected to perform the worst, with forecast capital value falls of 2.4%" (IPF UK Consensus Forecast Survey).
BNP Paribas Real Estate, in its more recent assessment of the long term prospects, has said that it will be 2025 at the earliest before commercial real estate values come back to the levels seen in 2007. What factors are causing this bleak outlook in the commercial real estate sector?
A major concern is that a second period of recession is imminent - the so called 'double dip' - has been pushed closer by the massive cuts in spending, and tax rises, announced by government in the Budget. It is quite possible that the effect of these will be felt strongly in 2011 by the consumer, whose spending will be curtailed, so bringing on renewed 'negative growth' for the economy.
An additional factor may well be new financial regulation for the banks - via a process known as Basel III. In order to prevent a repeat of the credit meltdown of 2007-8, banks will be asked to put aside more money to cover their credit risks. This will, however, cause banks to have less capital to lend - and so fewer funds will be available to commercial real estate investors, amongst others. This can only push the commercial real estate down, as those investors dependent on credit to purchase property are taken out of the market.
It does look as if now may therefore be a good time to put your commercial real estate for sale. If you are ready to move on to find a buyer your commercial property then SellMyCommercialProperty can help you. We are a company with substantial finances who looking to buy commercial real estate fast. Our experienced valuation team can get back to you with an assessment within 48 hours, anywhere in the UK, and we can close a sale without fees. So get in touch with SellMyCommercialProperty today if you see a sell signal coming from the market.
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