Fall in UK commercial property market easing as 2010 kicks off with a bang, report says

The average fall across all commercial sectors is 6.02% and while falls on the scale of last autumn are not expected, further declines in some parts are anticipated in the first half of 2010, says Cushman & Wakefield’s January business report on the UK property investment market.
 
The report suggests that the initial re-pricing of the market was driven by a lack of quality products and increasing awareness that pricing had moved too far. ‘The current stabilisation reflects the fact that pricing moved back a long way in a short space of time and we are seeing a pause for breath as the market absorbs the changes seen,’ it says.
 
Central London offices are still the main source of good news in the occupation market, with activity and demand up, incentives down and headline rents increasing in the City. With a subdued pipeline, growth projections are being marked up and a period of strong performance is likely.
 
In the retail sector, better than expected Christmas trading has provided a fillip to the market but this is set against a weak 2008 and the fact that many retailers are not prospering, the report points out
 
‘Moreover, as temporary Christmas lets are handed back and retailers re-evaluate their trading portfolios, availability will edge up further in some areas,’ it adds.
 
David Erwin, CEO of UK Capital Markets at Cushman & Wakefield said 2010 has kicked off with a bang and most investment agents have been busier in January than at almost any time since the late 1990’s and he predicts significant turnover in the next few months.   
‘Experienced vendors, including recent buyers, are taking profits whilst purchasers continue to seek stock which broadly remains in short supply. The current dynamics suggest the market is a win win for buyers and sellers and it will be a busy run in to Easter,’ he explained.
 
David Hutchings, Head of Research at Cushman & Wakefield said that one of the most notable changes of the past six weeks has been the improving confidence shown towards the occupational market, backed by pressure on rents in Central London as well as a hardening of attitudes towards incentives in a range of other areas.
 
‘As a result, more investors are ready to look further up the risk curve, accepting shorter leases for example. However, some of the recent improvement is a product of existing tenant demand being fast-tracked as occupiers sense a change in the market as well as by temporary lettings in the run to Christmas.  Hence, investors need to maintain a realistic perspective and be looking to price in a stabilisation in activity and prime rents rather than an imminent recovery,’ he added.