27 February 2023
The Ever-Moving Commercial Property Market: How Could It Benefit You?
Many investors have looked to the commercial property market for safe and tangible investment.
However, rising interest rates and economic unpredictability have recently put pressure on property values in Britain’s £1.6 trillion commercial property market.
Studies show that the capital value of commercial property in the UK decreased substantially in just six months. According to the MSCI UK Quarterly Property Index, the UK commercial real estate sector underwent its fastest-ever decline in the second half of 2022.
Between July and December of last year, capital values decreased by 26%, prompting Tom Leahy, head of EMEA real assets research at MSCI, to declare that the sector had “never recorded such a loss of value in such a short time.” He goes on to say, “While the decline in capital values is unwelcome news for property owners, the already-substantial correction may allow the market to start trading in greater volumes.”
According to CBRE’s data, the industrial sector was particularly heavily hit, with capital values declining by 21% and retail property capital values fell by 8.1% in 2022, while the office sector was down by 12.1%. It is also evident, however, that there is still a significant demand for high-quality office space in the UK despite flexible working. The challenge for tenants will be the lack of supply.
What will 2023 bring?
The transactional volumes in 2023, predicted by Savills, will reverse the high start and weak finish of 2022, although volumes are projected to remain similar at roughly £54 billion.
Tom Leahy noted, however, that a generally anticipated economic slowdown in the UK will, likely, operate as a headwind through 2023.
Whilst market trends lowered prices to an extent, this can be considered positive news because it makes commercial real estate a very attractive, tangible investment. At Cook Corporate, we are still finding commercial property business to be very brisk and buoyant.
How we can help
We are one of Bristol’s specialised commercial property law firms dealing with all aspects of commercial property acquisitions.
The broad market view is that although commercial property capital values have fallen in the past 6 months, this may not necessarily be a bad thing for investors, because commercial property may be cheaper to buy now, and therefore rental yields on let property have increased as a result of falling capital value.
Again, the expert assumption is that the commercial property capital values will recover later this year, so this may be the time to buy.
We can assist you with advice with all lease work, including the grant, assignment, subletting and surrender of leases and lease renewals as well which are not undertaken by many solicitors.
We deal with the acquisitions of freehold commercial property, including site assembly for development, and all aspects for development including, options, pre-emption rights, conditional contracts and post completion planning agreements, including Section 106 and Section 286 agreements.
If you are interested in the commercial property market, give us a call – we are here to help!