IPD research shows unsettled commercial property offers opportunities
31 January 2012
Written by Steve Olejnik
The unsettled real estate market could present investment potential, the latest Commercial Property Auction Data (cPad) Market Flash from the Investment Property Databank (IPD) and Acuitus has revealed.
Richard Auterac, auctioneer and chairman at Acuitus, explained "rare opportunities to start again" for investors could be realised in the next two to three years.
People looking for the best commercial mortgage rate could make money from what he called an "unjustified depression about the state of the market".
Rents that occupants approve of but enable the property owner to receive a decent return could exist as landlords will not have to raise these charges to service the loan, the specialist explained.
"A new generation of investors may be rising from the ashes of the last boom," Mr Auterac suggested.
He claimed these individuals appear to be more internationally-focused, display better financial savviness and understand the property market better than their predecessors.
People ought to assess the strength of prime real estate and commercial buildings in London to see whether their defensive characteristics could justify even higher prices, IPD research manager Greg Mansell commented.
Auction data reveals prime yields are moving out, while the institutional sector is realising price falls, he added.
However, the auctioning market seemed to be adaptable to alterations within the commercial market and was a strong barometer of wider property trends over the last year, the IPD specialist continued.
During the final auctions of 2011, the latest cPad report revealed that yields typically weakened.
Its typical all-property yield increased to 9.1 per cent, or a rise of 70 basis points, while this heightened to 12.6 per cent for those assets with fewer than five years before the expiration of the lease.
However, since October, the average retail yield weakened by as much as 110 basis points to hit 9.3 per cent.
In this sector, rents generally have to be smaller so tenants are attracted when leases run out.
Kelvin Davidson, property economist for Capital Economics, recently forecast a reduction of between two and three per cent for both rents and yields in the UK's business real estate.
"Commercial property is in dire need of some good economic news for the start of 2012," Mr Mansell declared.
