Two-year slump for secondary market, says GVA

GVA is predicting rental values in the secondary commercial property market will be in the doldrums for the next two years.

According to its report – “Secondary Property – A Users Guide” – the yield gap between prime and secondary properties has been widening since 2008.

It is suggesting landlords “work their assets” to avoid further value erosion.

This could mean more realistic pricing, or making use of new empty rates legislation and new planning legislation.

Mark Rawstron, regional senior director in the investment team at GVA, said: “It’s become clear that sitting and waiting can no longer work. Secondary property, by its very nature, requires a hands-on approach to avoid further value erosion.  

“With an imminent recovery before 2015 now unlikely, there will be continued downward pressure on values, so the only effective option is to start working these assets. Also, legislative changes to the Energy Act which are due to take effect in 2018 will increase the downward pressure on secondary property values further.”

He added: “Pricing of opportunities is becoming more realistic. Vendors and advisors are now waking up to the fact that not all secondary property should be valued at 10% net initial yield.”

Vendors are also finding it hard to shift secondary properties.