The value of UK commercial property dropped in March by 3.1 percent, according to the Investment Property Databank (IPD). That brings the total fall in property values to 8.9 percent for the first quarter of 2009. While that is a steep drop, it less than the final quarter of 2008 when property values fell by 15 percent.
The first quarter of 2008 saw a drop in commercial property values of 4.7 percent, so the 2009 amount is a steeper decline than the previous year. According to IPD, declining rents are becoming a significant part of the falling values.
“Tenants are seeing downward movement in rents quicker than in previous property recessions because leases have become shorter and more flexible, with greater break clauses,” said Malcolm Frodshan, research director at IPD.
He continued, “Although, while this momentum in falling rents is a concern for property owners, an implied income return of over 8%, based on annualizing March’s figure, must be whetting the appetite of value and income seeking investors.”
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