Capital Economics: Commercial property values will fall in 2012

21 December 2011

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The value of commercial real estate is likely to fall during 2012, according to one expert.

Capital Economics property economist Kelvin Davidson argued this will be due to a more general shrinking of the country's fiscal state, which will result in this asset class having lower average rents.

He noted the confidence of investors has also "taken a bit of a knock", which could push up yields and result in price falls.

During November, the amount a commercial mortgage holder could expect to pay for these buildings declined, which is the first time this has occurred for 28 months, the Investment Property Databank's recent Monthly Index Statement revealed.

Mr Davidson pointed out this drop was minus 0.02 per cent, adding: "In my mind, that is flat."

A relatively static market has been seen for "at least six months", the expert declared, calling this fall "just a continuation".

However, it is "not a temporary blip", he predicted.

Prime retail space in London's West End will remain strong, Mr Davidson added.