'No growth' in distressed commercial property prices

01 September 2011

Written by Jenny Barrett

Investors considering taking out a commercial mortgage in order to purchase distressed real estate can expect to see no significant increase in the value of these assets in the near future.

This is according to Capital Economics property economist Kelvin Davidson, who said that "prices will stay very flat for at least 12 to 18 months".

"There is no rental growth", he pointed out, stating that this is the reason why any previous rise in the costs of these buildings is no longer notable.

A survey from the Royal Institution of Chartered Surveyors (Rics) found a sharp heightening in the worldwide demand for these premises during the second quarter of 2011 with supply outstripping demand in many countries.

However, the expert claimed his company believes "there is not much property available for sale and quite a lot of money chasing it".

This "goes against the [Rics] survey slightly", Mr Davidson noted.

More of these structures on the market, due to a higher number of foreclosures or any other reason, would "actually be quite welcome", he added.

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