Hammerson, one of the leading European property companies, declared that the UK commercial property market, which has been declining for the past two years, is starting to recover.
Chief executive officer John Richards said that the decrease of rental rates is slowing down and this signals an overall slowing pace decline in the UK. He added that in the near future the industry will see the stabilization of values.
When it comes to defaults, he expects them to be defaulting more rarely, especially in the prime commercial property sector.
His predictions are backed up by figures from the Investment Property Databank which shows that UK commercial property values have declined by 44% since its peak in June 2007. In May 2009 the prices decreased by 1.6%, the smallest fall in the past 12 months.
Richards added that commercial properties which are either poorly located or are in bad condition are expected to lose value, while prime properties will gain value.
But it is a different story across the Atlantic. In the US the number of commercial properties in default, foreclosure or bankruptcy are now valued at more than $108 billion, an amount that has almost doubled since the beginning of the year.
Research from Real Capital Analytics, shows that a scarcity of credit is causing property defaults in all regions and among every investor type. Hotels and retail properties are among the most problematic assets, it said in a report.
'Perhaps more alarming than the rapid growth in the distress totals is the very modest rate at which troubled situations are being resolved,' the report added.
Even although about $4.1 billion of commercial properties have emerged from distress, the future is still gloomy. 'In far more situations, modifications and short-term extensions are being granted, but these can hardly be considered resolved, only delayed,' the report concluded.
