Now going on for 5 years in to this crash, Ireland is still in a bad way. After what seemed like it maybe a bottom for house prices, they fell again in June, and the commercial market is worse, way way worse. But unfortunately at the moment the UK commercial scene is worse according to the latest data from Investment Property Databank.
Of course it is not only the IPD index that is telling is the UK commercial property market is incredibly sick right now. According to the latest estimates published by the ONS, construction output fell 5.2% in the second quarter, following a 4.9% slump in the previous three months. Total returns for investments in commercial property slumped to 0.4% compared to 0.8 the previous quarter, but were held positive by the inclusion of London.
But now, according to the latest quarterly index by IPD, net investment in property outside of London (including investment, sales, development and refurbishment) in the second quarter fell £161 million compared to Q1, the first negative result since March 2009.
This shows a massive weakening of confidence in the UK economy. Investor putting more money into workspace and retail investments shows that they are confident that they will be able to take on new tenants; and that they are confident in the economy.
Because the economy is in such poor shape, with weak consumer demand and struggling local industries, the lack of viable tenants outside the capital has led to discounts of up to 45% on commercial properties. This makes investors wariness to invest, despite the discounts giving way to income yields of over 7%, another stark indication of just how low confidence in the sector is.
- Friday 03 August 2012