London, United Kingdom, April 28, 2011 --(PR.com
)-- Prime commercial property values could rise by 20% over the next five years and secondary property values could rise by a further 5-10%, according to the latest Commercial Property Values report published by Chesterton Humberts and cebr.
With a focus on London, the report considers the many factors that impact on commercial property values including: interest rates, bond yields, prospects for city employment and combines them with an analysis of the annual growth for property values in London’s West End and City markets since 1991. These historic trends have been applied to the current economic cycle to forecast movement in values of prime and secondary commercial property.
Chesterton Humberts’ head of commercial Paul Abrey, says: “Historically slumps following financial crises invariable turn out to be deep and prolonged, however the current economic downturn has been unusual as the UK experienced a relatively strong increase in economic output in 2010. The delayed recovery of secondary property values in 2010 can be explained by the fiscal adjustment currently taking place dampening economic growth in the medium term and raising prospects for a weaker 2011 and 2012 and risk aversion in all sectors of the market, particularly the debt markets.
“There is also perception that pricing of secondary stock has not fallen enough with a dichotomy in a sale situation that buyer and seller price expectations are adrift making the secondary stock quite difficult to transact on.”
By applying forecasts for government bond yields, and given the current economic climate, Chesterton Humberts and cebr suggest that prime property values could rise by around 20% over the next five years. The analysis also suggests that, in the context of a protracted economic recovery, secondary property values can be expected to rise by a further 5-10% relative to prime real estate assets.
Abrey adds: “Many commentators would agree that 2010 proved to be a surprisingly good year for commercial property. However this revival was polarised very much in favour of prime real estate assets driven by risk aversion and the international nature of the investor in the UK market whose aims and objectives were as much about wealth protection and long term hold rather than short to medium term asset management. Once the market for second had stock has reached correct pricing levels, we can expect a steady increase in values for secondary property over the next few years which could see it outperform prime assets by an additional five or ten percent.”
Notes to editors:
This report has been produced by Chesterton Humberts and the centre for economics and business research (Cebr).
With a network of 60 offices across the UK, including 27 in London, Chesterton Humberts is one of the UK’s leading property consultancies with a full range of property services including residential sales and lettings, commercial agency and management, rural land management, professional advisory services, professional valuation and other surveying services. The company also has a significant international presence with eight offices around the world, including St Tropez, Gibraltar, Mallorca, Lake Como, Singapore, Abu Dhabi, Sydney and Brisbane.
Cebr is an independent economics and business research consultancy established in 1993 providing forecasts and advice to City institutions, government departments, local authorities and numerous blue chip companies throughout Europe. The contributors to this report are senior economist, Benjamin Williamson and Chief Economist, Douglas McWilliams.
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