The commercial property market in 2011
Economic climate the world over still casts its shadow on the Commercial Market. However, since there are imminent first signs of plateauing of the downturn, it comes with a hope that the recovery in real estate market might have started.
UK market primarily can be divided into areas in and around London and others as rest of UK. Also a prominent feature in this market is the price disparity between these two markets. After a bullish run in 2007-08, before recession, when property rates had soared in and around London, investors started looking for cheaper options in downtown. However, if we analyse the return of overall market today, it stands at a dismal 4%, which is very low as this is directly dependent on inflation. Add to it, the figures of property lending rates and maintenance cost, it provides as an unviable proposition.
The recovery in time ahead (one year from a short term perspective), will depend on the following factors which are also prime indicators of economic change.
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Fundamentals & Current State of Commercial Real Estate (CRE) - Biggest issue that any person directly or remotely associated with CRE is the uncertainty in this business space. However, industry is unable to get a clear cut signal of whether this has touched its rock bottom or can go further. This becomes more important as the debt accumulated today in these properties has become more than the property valuations in many cases due to fall in property prices in key areas in and around London.
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Looming Debt - The key challenge to be faced in the next 2~3 years is that the chunk of debt is going to get due between 2012~2015 world over as the average age of paying out the loans is catching up. This poses both as an opportunity as well as a threat as weak economy coupled with poor commercial real estate fundamentals give a greater factor of uncertainty.
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Economy - Basic economics signals growth in GDP and Employment rate before the real estate sector will pick up. Even in the real estate segment residential will pick up first and will be followed by CRE. The entire cycle is a minimum of 3~4 years which is again shrouded by uncertainty.
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Capital Markets & Globilisation - As an alternate means of investment, money of people in UK is blocked in these Commercial and residential properties. After the bullish run in 2007, investors who made capital gain from property have invested heavily in Capital Markets around the world, which have shown selective growth especially for those who had invested in India and Brazil. Investors are waiting for the right moment to take out their money to maximize liquidity.
Also due to Globalisation, the buyer profile is changing, though there is cross border investment in property, investors are few as mass of younger population are still in a process of understanding these markets and related CRE Businesses.
Commercial property Hackney and office space Liverpool Street are two of the most in demand office space locations in London. Both commercial property Hackney and office space Liverpool Street are embedded with high end office spaces to accommodate every kind of business.
