Expert highlights lack of prime property - commercial mortgages

04 April 2007

The gap between prime and non-prime commercial properties in the UK is showing signs of narrowing, prompting concerns over the yield potential of many buildings, according to one expert.

Chris Gilchrist of everyinvestor.co.uk argues that expensive properties are creating a situation where investors cannot be guaranteed strong returns in the short of even mid-term, which poses a problem for investors looking for lucrative deals.

He also highlights a lack of prime property as problematic, stating that low availability of buildings that can demand a premium will impact upon rental yields. For commercial property investors this could spell a downturn in returns in the future.

In addition, a paucity of attractive commercial buildings in high demand areas could also impact upon the uptake of commercial mortgages.

"The fact that prices have surged and cut rental yields means managers of UK property funds are having to search further afield for bargains," he explained.

"Several managers have told me they think the gap in valuations between ''prime'' and non-prime property has become too narrow."

Gerald Ronson of Heron International recently warned that there may be challenging times ahead in UK commercial property due in part to over-confidence among investors.