The value of Commercial Property

The commercial property marketplace in the UK continues to struggle in the current economic climate.  The first 6 months of 2012 show a downturn again and the outlook to be less that favourable.  We posted recently about regional shopping centre acquisitions and it is of note that the survey shows overall values in the sector down by 6.3% in the first 6 months of the year.

There has been a slight up turn in the office sector which, particularly in central London, has shown minor growth.  It is of note that the general trends in the office sector are in a downward direction, in terms of occupancy requirements.  New working methods, including the much heralded opportunity to work from home (how many organisations are getting that one wrong, I think we will have a posting on that subject alone in the near future?) and a changing workforce demographic are all factors that would suggest a downturn in demand could, over time, lead to a diminishing in values.  However, limitations in the availability of funding for new development, the shaky perception of the market in general, the continuing trend for conversion from commercial to residential in parts of Mayfair and the West End combined with the requirements for organisations to develop and implement ever more strict environment and sustainability plans mean that the limitations on supply are bolstering the current marketplace.

Where this will go in future is very much up for discussion.  The standard institutional lease is still alive and well and living a life under a new identity.  In this new guise, there are more opportunities for prospective tenants to negotiate with the landlord from a position of strength and as such a stronger model for occupancy is being introduced.  Watch for further development in the process.

For those with a strong nerve and deep pockets, taking advantage of the current market where values of freehold are potentially at their most advantageous to the acquirer, entering the commercial property sector in any form could be seen as the move to make.  Carefully selected and prepared, commercial sector investment now and held over the long term could be just the thing.