Commercial Property Prices Sliding

[Boxer]

I have just read on The Times Online that it's not only residential property prices that are expected to fall. Commercial prices already are already falling so much that commercial fund managers are not letting investors sell units in their funds. Does this mean that residential prices are likely to follow suit? And if so, is this a good or bad time to buy?

You can read the full story here http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3234533.ece and here's the text just in case that link doesn't work...

From The TimesJanuary 23, 2008
Commercial property fund investors face continued slide in asset prices

Hundreds of thousands of retail investors locked into commercial property funds are set for six months of further pain as prices of shops and offices continue to slide, but the market is expected to start to bottom out in the second half of this year.

Scottish Widows this week imposed a six-month delay on investors wanting to sell units in £2.1 billion of property held in its life and pension funds to prevent it becoming a forced seller of buildings in a falling market. The restriction affects about 200,000 policyholders as Scottish Widows grapples, like other big property fund managers, with a run on its funds reducing cash levels from its target of 10 percent to 2 percent.

Since the end of November, seven property managers have imposed time restrictions ranging from three months to a year on investors looking to redeem units in property funds, affecting more than £10billion of assets and about 450,000 retail investors.

Land Securities, Britain's largest property company, revealed yesterday that it had sold £507million of its shops and offices in the final three months of 2007, bringing the total sold for the year to £2billion - more than twice its usual annual sales. However, directors of Land Securities hinted that they were ready to start buying in earnest later this year to take advantage of a high volume of expected sales from property funds and highly geared private investors.

Francis Salway, chief executive of Land Securities, would not predict when exactly prices would bottom out, but said: “The speed of repricing of investment property means the timing for opportunity [buying] may come a little sooner than might have been expected - the first half rather than the second half.”

Martin Greenslade, finance director of Land Securities, confirmed that it had £500 million of available but undrawn borrowings at the end of 2007. He added: “We can raise facilities depending on the assets we would look at. We can deploy considerable firepower into the market.”

Land Securities' comments come after admissions late last year by Stephen Hester, chief executive of its rival British Land, that he is ready to dip into a £2billion war chest to pounce on an expected flurry of distressed property sellers.

At the end of December Glanmore imposed a six-month notice period[] on any of its 3,700 investors looking for an exit from its property fund, last valued at £1.2 billion.

Prices of commercial property fell by 4.2 per cent in December, taking the total decline in only three months to 9.7 per cent - a sharper drop than that suffered in the recession of the early 1990s, according to figures from Investment Property Databank, which monitors £400billion of privately owned assets.

The onset of the credit crunch last summer pulled the rug from under the investor market. Prices have fallen by an average of 11.7 per cent since a peak hit in June.

The sudden decline in property prices prompted a run on property funds by retail investors, which in turn rapidly reduced their cash as they struggled to sell buildings into a market in which buyers were scarce.

Norwich Union has seen the value of its Property Trust - Britain's larget property fund - fall from a peak of £4.4billion last May to £2.8 billion this month. It recently changed from monthly to fortnightly valuations.

A Norwich Union spokesman said yesterday that the fund remained open to investors. The spokesman said: “The market is under pressure and we are as well, but at the moment there are no immediate plans to sell [assets].” The fund had 5.9 per cent of its assets in cash at the end of 2007, down from 14.3 per cent at the start.

[buyproperty]

Good information on commercial property prices. These properties are getting down and many investors are not ready to invest money in commercial properties. I will make use of your post.

[pram-rmproperties]

Hey my name is Pram from RM Properties and i was wondering if you have any deal for residential or commercial deals or portfolio deals

We are in a position to deal with all sale becuase we have 3000 residential property buyers and a handful of cash rich investors to buy from £1m up to over £1bn.

[davey]

Any idea how stable commercial prices are compared with residential?

[arliejacobs]

Due to weakened market, small and medium-sized property developers are the most nervous as they are faced with more financing pressure compared with listed companies, with commercial banks taking tighter measures to rein in credit.