U.K. commercial property values declined for the first time since July 2009 as the European sovereign debt crisis and concern about a possible U.K. recession hurt retail assets.
The average value of stores, offices and warehouses declined 0.02 percent in November from a month earlier, Investment Property Databank Ltd. said today on its website. Retail values led the decline, falling 0.1 percent.
Michael Marx, chief executive officer for Development Securities Plc, predicated that values will fall by 2.5 percent to 5 percent in the first half of next year. A possible improvement in the second half could leave values little changed to 2.5 percent down for 2012, he said by e-mail.
Values had risen 17.8 percent in 27 months of continuous growth after falling 44.1 percent from June 2007 to June 2009, according to IPD. London is still seeing positive capital growth, but this is being outweighed by poor regional performances, IPD said.
The negative capital growth was driven by declines in retail properties, IPD said. The overall decline of 0.1 percent was driven by a 0.4 percent drop for stores outside London. Shopping malls inside London lost 0.4 percent of their value and outside the capital they shed 0.5 percent.
“Deep uncertainty about the potential of the U.K. to avoid recession next year is now finding its way into property values,” said Malcolm Hunt, IPD’s U.K. and Ireland client services director.
Gain Over 12 Months
Prices rose 1.6 percent in the 12 months to Nov. 30, compared with a 1.7 percent increase in the 12 months to Oct. 30, IPD said.
The index was compiled from appraisals of 3,592 properties valued at 34 billion pounds ($52.5 billion) at the end of September, IPD said.
Rent performance next year will be linked to economic growth, Tony Key, professor of real estate economics at City University London, said in a telephone interview.
“In a normal cyclical recovery we would have seen rents moving on from zero about the middle of this year, just edging up and oozing into 1 to 2 percent growth,” he said. “You can write that off across the board” if forecasts of almost no economic growth in 2012 prove accurate.
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