IPD: City office values fell in December

19 January 2012

Written by David Whittaker

The value of offices in the City of London fell by 0.1 per cent during December 2011, a study has found.

This is the first time the price of this asset class has dropped for 27 months, the UK Monthly Index Statement from the Investment Property Databank (IPD) stated.

Between 2007 and 2009, these buildings lost 50 per cent of their value, but had recovered 35 per cent of this by November 2011, it continued.

However, there was still strong capital growth in the West End, where the price of real estate - which may be sought by people looking for a commercial mortgages calculator and other investors in business premises - rose by 0.7 per cent.

Throughout the UK, values declined by 0.1 per cent during December and this resulted in the fourth quarter of 2011 experiencing slightly negative growth overall.

Most badly affected was the retail sector, which saw values lessen by 0.3 per cent, compared with a fall of 0.2 per cent for industrial buildings and an increase of 0.2 per cent for offices.

During the month, total returns hit 0.5 per cent, revealing a drop throughout retail, office and industrial spaces.

UK and Ireland managing director of the IPD Phil Tily predicted a "less than ideal" market for property investors during 2012.

"Returns tailed off considerably" during the end of 2011 as the eurozone situation became more difficult and the danger of the UK entering recession rose, he explained.

The next 12 months "may be a year of re-evaluation in regards to pricing levels and a heavy concentration on income", the specialist stated.

Overall, the value of commercial property will shrink by an average of five per cent over 2012, with the typical rent received declining by between two and three per cent during this timeframe, Capital Economics property economist Kelvin Davidson recently asserted.