King Sturge will today predict that commercial property prices could drop more than 9% in 2008, adding to already significant drops in value over the past six months. Financial Times

King Sturge’s 2008 forecast indicates that capital values will continue to fall in all sectors of commercial property, with retail and industrial buildings being worst hit but central London offices offering greater resilience.

The agent will say that overall capital values could drop by up to 9.5%, similar to losses seen in 2007, but the fall in total returns will be narrowed to 4% owing to a growth in rents of 2.5%.

It predicts that capital values will cease falling by Easter, although it warns that the volume of transactions could remain very low.

The agent will give better news to the residential property market, saying that the combination of supply constraints and buoyant employment levels will see house prices rise by an average of 3%.