Analyst sees better times for commercial mortgage market - commercial mortgages

08 January 2008

A commercial property commentator has suggested that, while there have been reports that the sector''s future is bright, the negative trend is set to continue.

Brian Dennehy, managing director of investment adviser Dennehy Weller, recently commented that commercial property''s downturn had bottomed out, yet Citywire''s Richard Lander pointed to a recent report by commercial property agent DTZ as evidence that the sector is not in such good shape.

DTZ has predicted that demand for office space will fall by 15 to 20 per cent as banks and other financial institutions seek to cut costs in the wake of the credit crunch.

This would inevitably lead to reduced rents and landlords offering incentives such as rent free periods.

However, Mr Lander has also noted that this could be good news for investors in the long run, as when the market does eventually bottom out there will be a shortage of supply and both rental and capital values will rise quickly.

As a result, it may soon be time to buy - with a consequent rise in demand for commercial mortgages to be expected.

In related news, Royal Institution of Chartered Surveyors economist Oliver Gilmartin said the most challenged area of commercial property this year will be the retail sector.