'Painful losses' predicted for commercial property investors
Commercial property investors should brace themselves for “painful losses of capital” in the wake of the market peaking. This is according to John Ficenec, the Editor of The Telegraph’s Questor column, who suggests the sector is “heading for a fall”. Should commercial landlords see this as a cause for concern?
Why the market may have peaked
Oil-rich nations have been hit by the world’s most traded commodity falling in value, Mr Ficenec explains. As a result, their buying power has weakened and Middle Eastern investors aren’t purchasing as much commercial property as they used to.
The former KPMG accountant added that just as demand is declining, supply is increasing. By 2020 there will be another 26 million sq ft of commercial property space created in London – 40 times the size of The Gherkin building in London.
Meanwhile, recent figures from the Office for National Statistics have revealed that bankers’ bonuses are diminishing. This, combined with a slowing of the rate that rents are increasing and falling growth in the technology sector, suggests economic factors will contribute to the market cycle.
The timing of political events
Uncertainty over the UK’s future relationship with Europe is also affecting the commercial property market. If the country votes to leave the EU, Mr Ficenec suggests, then property prices can be expected to fall – at least until trade agreements between Britain and Europe are finalised.
He added that further unpredictability has been caused by the upcoming London mayoral elections in May, with the candidates having different policies regarding the amount of foreign investment they will permit in the capital.
Landlords may be affected by this combination of political and economic uncertainty in the form of decreased rents. The prospect of tenants falling into commercial rent arrears, meanwhile, remains relatively high while the market remains at a peak – even if this peak is coming to an end. Ethical Enforcement Agents Dukes Bailiffs specialise in helping landlords recover funds and maintain a steady cash flow.
