Survey predicts long-term stability in commercial property market

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by Lin Freestone

According to research carried out on behalf of Investec Private Bank’s Structured Property Finance division by Property Week, the majority of property professionals believe commercial property valuations will stabilise before the end of 2008.

A total of 137 property professionals were surveyed in April 2008. They estimated that prime UK commercial property values fell by an average of 10% over the past 12 months.

Secondary UK commercial property values were considered to have fallen by almost 14%. Eighteen per cent of those interviewed estimated that secondary valuations have dropped by as much as 16% to 20% in the past year.

More than half, 57%, consider that valuations will steady, while 39% of the respondents believe they will continue to fall for the rest of the year.

A member of Investec Private Bank’s Structured Property Finance team has commented that the research demonstrates how the impact of the fall in property values has been greater on secondary rather than prime property. The correction in UK commercial property valuations was under way well before the credit crunch started last August.

The study suggests that most investors are willing to call the bottom of the market this year and attempts to explain why such a high number are either maintaining their exposure or looking to increase it. It is considered that the key will be how quickly the availability of senior debt picks up.

The majority of property professionals (60%) intend to maintain their current commitment; 25% are planning to increase their exposure; and just 15% believe they will cut back their exposure to the UK commercial property market.

Structured Property Finance, a division of Investec Private Bank, provides a range of senior debt, mezzanine debt and equity solutions to assist clients who are active in either residential or commercial property acquisitions.