Next to go? Commercial property in crisis as City [London] faces a chill winter

The Guardian ^ | Saturday 27 December 2008 | Phillip Inman

[DeaconBenjamin]

Commercial property values will halve and rents and occupancy rates will suffer steep falls as the once-buoyant sector faces meltdown in 2009, according to property experts.

Severe overcapacity in London after a rash of speculative office building and a collapse in demand is seen as the main reason for the expected crash.

Hedge funds in Mayfair and St James's have led the way after many emerged as some of the biggest losers from the credit crunch. Rents of £105 to £110 a square foot for the swankiest offices have dropped to £95 in the last couple of months, according to agents Jones Lang LaSalle.

Offices in the City and the West End have also been hit by the collapse in the banking industry and other sectors. Rent-free introductory offers are becoming more popular and now average three years compared with 18 months at the beginning of the year. Analysts at Capital Economics said rents in the West End were down 8% from their peak, according to the latest IPD index.

The fall in commercial property values has already helped claim some notable scalps. The troubles that led to the demise of David Ross as chairman of Carphone Warehouse are rooted in the falling value of his commercial property investments across Britain and John Duffield, one of the City's most colourful characters, has been forced to give up his New Star Asset Mangement empire after it was weakened by the collapse of one of its high-profile property funds.

The latest figures show the rest of the country is beginning to follow London as rental values across the entire commercial property sector fell in November for the first time since 2004.

[citizen]

Mark Dampier, head of research at Hargreaves Lansdown, advises investors to stay away while the credit squeeze persists.

“The whole of the property market - commercial and residential - is built on credit and when there is a credit crunch it is unable to function properly.”

Despite his protests small investors ploughed at least £20bn into commercial property funds in the five years to 2007. Much of that money, for the time being at least, has disappeared.
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This is a world that went mad for the artificially cheap credit. Who knows how long/how bad this depression will be?

[Chode]

with the double wammy of the taxes staying high as the property value drops...

[tvdog12345]

This is good. Low rent is good.

[CWW]

This is the next bubble coming here -- wait until Feb/March after the fallout from lousy retail sales.

Low rent may be good, but dark buildings from a lack of renters is a disaster!

We are seeing it with our commercial developer clients.

Believe me, this is NOT GOOD - And it's global!