Surveyors sound cautious note
THE appetite for buying and letting commercial property has
fallen to a four-year low as turmoil in the credit market scares
off prospective tenants, according to an influential industry
body.
The Royal Institution of Chartered Surveyors (RICS) is likely to
stoke fears that the market is heading for a depression not seen
since the early 1990s.
Eight per cent more chartered surveyors expect a fall than a
rise in demand over the coming three months – the most negative
sentiment recorded since the end of 2003.
The findings pushed the share prices of Britain's nascent
£25bn real estate investment trust (Reit) companies to fresh
lows, wiping off hundreds of millions of pounds.
The sector has on average lost 40 per cent of its value since
the start of the year. Fears are also mounting that many heavily
leveraged private owners of offices and shops may be turned into
forced sellers over the coming months.
Without a loosening of the debt markets, some may find it hard
to refinance borrowings and a flood of forced sellers could trigger
sharp price falls. Six months ago, surveyors were expecting strong
rent rises across all property sectors but the findings from RICS
revealed that surveyors are at best confident of only modest rent
rises.
Their negative sentiment was mostly driven by the retail sector,
where confidence fell to the lowest level since the first quarter
of 2003. A net balance of surveyors expect rent falls from retail
property in Greater London, the North East and South West.
Simon Rubinsohn, chief economist at RICS, said: “The
turmoil in the credit market is being most acutely felt in
commercial property as the sector is more dependent on capital
market funding than in the past. Business expansion has been put on
hold in the short term, with the near-term outlook for rents weaker
as a result.”
Pessimism grew between July 1 and September 30, when 1 per cent
more surveyors reported a fall rather than a rise in demand, the
first time the balance has turned negative since 2005.
This echoed concerns expressed last week by the heads of both
Land Securities and British Land, Britain's two most valuable
commercial property companies, that price falls already under way
across the sector could continue for several months.
British Land was forced to pull the £1.64 bn sale of its
flagship Meadowhall shopping centre in Sheffield last month. last
week it wrote down its value by 4.8 per cent over the three months
to September 30, to £1.57bn. Analysts believe further
write-downs are inevitable. Together, Land Securities and British
Land sit on estate valued at about £31bn.
