Bloomberg News

U.K. Commercial Property Falls for Third Month on Economy

February 14, 2012

(Updates with City of London from fifth paragraph.)

Feb. 14 (Bloomberg) -- U.K. commercial real estate prices fell for the third consecutive month in January as a slowing economy hurt demand for all types of property.

The average value of stores, offices and warehouses declined 0.2 percent in January from a year earlier, Investment Property Databank Ltd. said today in a statement on its website. Warehouse-type properties led the decline, falling 0.3 percent, the London-based research company said.

“It’s no surprise that demand from tenants remains lackluster across all sectors. The recent quantitative easing announcement by the Bank of England shows just how hard the authorities are trying to increase spending,” Phil Tily, managing director for the U.K. and Ireland, said in the statement.

The Bank of England plans to pump another 50 billion pounds ($78 million) into the U.K. economy as it tries to prevent a slide back into recession. Chancellor of the Exchequer George Osborne said on Jan. 25 that Britain had “substantial economic problems” and dealing with them has become more difficult because of the sovereign debt crisis affecting countries that share the euro currency.

Rents in the City of London financial district fell 0.1 percent last month as buyers showed “anxiety” about the prospects for rental growth in the short term, IPD said. That’s causing investors to question the asking prices for real estate there, according to Tily.

Values in the area, known as the Square Mile, fell in December ahead of the January rent decline, IPD said. U.K. financial services firms eliminated 58,000 jobs in 2011, more than any other country in the world, according to data compiled by Bloomberg.

U.K. commercial real estate prices fell 0.1 percent in December and 0.02 percent in November after gaining 17.8 percent in the previous 27 months of continuous growth. Prices dropped 44.2 percent from their July 2007 peak to their low point in July 2009, according to IPD. Values may fall by 5.9 percent this year, JPMorgan Chase & Co. said in a Jan. 13 note to investors.

Total return, which combines the change in property values and rental income, was 7.8 percent in the 12 months to November, IPD said. The index was compiled from appraisals of 3,628 properties valued at 33.9 billion pounds at the end of January, IPD said.

--Editors: Ross Larsen, Jeff St.Onge

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net

To contact the editor responsible for this story: Ross Larsen in London at rlarsen2@bloomberg.net.


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