The slump in the commercial property market will be worse than the downturns of the 1990s and 1970s, according to the RICS.
Since the onset of a property downturn in mid-2007, capital values have plummeted 25%. RICS expects a further drop of 25% over the next two years.
Analysts said commercial property had entered a “double dip”. This is where falling rents from struggling occupiers lend unwanted momentum to the decline in prices caused by a cyclical market downturn that began before the recession.
RICS warning about a further fall in values will shock the sector’s ravaged investors hoping for respite after a damaging 18-month slide in prices that has already seen many bank debt covenants breached or renegotiated because of the drop in the value of their collateral.
Oliver Gilmartin, senior economist, said: 'We are only halfway through the price correction in the commercial property market, with values set to fall through 2009 and 2010 as rental declines gather pace.'
A slowdown in rental growth, as the UK enters recession, underpins RICS’ assessment. It expects rents to fall 10% in 2009, 4% in 2010 and 3% in 2011.
Financial Times, The Guardian