Commercial Property - The Current Market Review

September 2008

Since our last publication, sentiment within the property market has taken a further knock as the credit squeeze continues to bite.  As we put this issue to bed, in the space of 5 days, we have seen the collapse of Lehman Bros, the take over of Merrill Lynch, the meltdown of banking stocks, resulting in the take-over of HBOS by Lloyds TSB culminating in massive intervention by the US Government (and probably the UK Government in time) to steady the banking sector and inject some liquidity into the credit market..... Truly unusual times.

A recent survey of property values suggestes that throughout the commercial property sector, values have fallen over 11% this year and some 22% on an annual basis.

This is more than we should have expected, if history teaches us anything in the property business, it is that years of abundant credit avaialbility, drives a market beyond it's true worth and eventually a correction has to be made.  The difficulity is  assessing how long the pain will last.

As expected the number of transactions has fallen significantly as tenants and purchasers take a more cautious view of the economic climate ahead.

Ironically, whilst the credit squeeze has undoubtedly affected the freehold market, the leasehold market has held up with occupiers preferring to look at short term lease options whilst buying is proving difficult.

Fortunately the Region within which we sbh Page & Read operate, namely, North and East London and the M11 corridor is not over supplied with industrial, warehouse and office properties and furthermore with few new developments proposed we are unlikely to see a glut of property which will take years to sell or let, which was the position experienced during the recession in the early 1990's.

Deals will be difficult to conclude as serious enquiries in the market are and will continue to be few and far between, but as long as stock levels do not increase dramatically over the next 12 months, there is hope for a more encouraging outlook.

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