U.K. Commercial Property Values Fall for Fifth Straight Month

U.K. commercial real estate values fell for the fifth straight month in March as the country’s economic woes crimped returns, Investment Property Databank Ltd. said.

The average value of stores, offices and warehouses declined 0.3 percent last month from February, IPD said in a statement today. Retail properties led the drop, declining 0.5 percent. Total return, which combines the change in property values and rental income, rose 0.2 percent from a month ago.

The U.K. economy probably just avoided a technical recession of two consecutive quarters of falling economic output by growing 0.1 percent in the first quarter, the National Institute of Economic and Social Research said on April 5. Lenders are reluctant to provide loans for real estate purchases and have been selling assets to shrink their balance sheets amid stricter capital standards.

“The demand for secondary quality U.K. commercial property is greatly hampered because of a lack of debt to fund acquisitions,” Deutsche Bank said in a note today. “We expect the current two-tier market to continue with the valuation of secondary quality property continuing to deteriorate.”

The outcome for retail in March was the worst since May 2009 as “poor performance and yet more administrations impacted on values,” Phil Tily, a managing director at London-based IPD, said in the statement.

“Only Central London standard retail and London retail warehouses saw any positive growth,” Tily said. “Regional shopping centers and high street retail saw the steepest falls in value.”

Editors: Jeff St.Onge, Andrew Blackman.

To contact the reporter on this story: Neil Callanan in London at ncallanan@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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