UK commercial property values fall by 7.2% in 8 weeks - C&W

UK commercial property values have fallen by 7.2% in the last eight weeks, according to global real estate adviser Cushman & Wakefield (C&W). Figures in the broker's latest business briefing on the UK market also indicate that average prime UK yields had increased to 6.49% by mid-October, the highest since 1993.

The report notes that the UK remains at the frontline of the global financial crisis and continues to undergo a rapid adjustment in real estate pricing. Prime yields moved out by an average of 27 basis points in the four weeks to mid-October; equivalent to a 4.2% fall in value. This followed a smaller 20 bp increase the previous month. Faced with these shifting values investment trading fell still further with volumes down 22% on the previous quarter according to Property Data.

C&W believes that prime yields will move out further but they should be largely stable by June 2009 and may in some cases drop back later as 'excessive market corrections are addressed'. The firm forecasts that secondary yields, however, will continue to rise further throughout 2009 as the weaker health of the occupational market exposes their relative lack of income security and sustainability.

David Hutchings, head of research EMEA, C&W, said: 'We expect to see negative total returns across all properties of -20% to the end of this year and -6% for 2009. These could yet prove to be conservative estimates, however, with the market very much driven by sentiment.'

'What we need is an increase in investment activity to reintroduce confidence and liquidity. For that we need a fully functioning debt market but we don’t expect to see significant lending against commercial real estate until at least the latter part of 2009 and even then we only expect capacity to return to 2002/03 levels. This lack of debt will however throw up some excellent opportunities for cash-rich investors over the next six to nine months.'