Fall and rise of the commercial property market

The nose-dive in commercial property in most of the developed markets of the world can be traced to the second half of 2007 when investment started to fall by a noticeable amount with the effects of that fall carrying on into 2008. However, in many of the developed property markets (e.g. Europe), property actually hit a peak in terms of investment in 2007 as well. The duality of property is that the markets reversed in a very short amount of time.

Funding and investment dollars almost completely dried up in the UK as they fell by 14bn Euros during the second half of 2007, according to CB Richard Ellis. Compared to the previous year, commercial property investment fell by 9%; however this is much less when comparing the considerably larger decline when compared to the first half of 2007. Head of research of Africa, the Middle East and Europe at CBRE Nick Axford stated that the shift in perspective from financial institutions and lenders made it nearly impossible to fund or invest into any commercial development without having already signed up tenants. "Speculative development capital has now all but evaporated," he added.

Axford also stated that a permanent return to a considerably normal property market is likely, however a return to the atmosphere of considerably free and easy credit and capital is very unlikely. He said, "To expect us to go back to an environment we had in 2005-6 in the future is just unrealistic. It's no back to basics, back to a world where risk is priced in to property transactions."

While the United States was hit quite hard during the 3rd and 4th quarters of 2007, there were a number of markets in Continental Europe which reached record investment highs. Cities such as Stockholm, Madrid, Amsterdam, and Moscow along with four cities in Germany, Hamburg, Frankfurt, Berlin, and Munich, were all in CBRE's top ten cities of 2007 within this category.

The very turbulent 2007 real estate and property investment markets saw both record highs which occurred during the 1st and 2nd quarters and record declines during the 3rd and 4th quarters. While many experts simply assume that markets in general all over the planet were in near freefall, the figures show the opposite was true in a substantial number of cities. As the saying goes, all real estate is local.