An increase in the number of distressed commercial real estate assets for sale in the UK could result in values falling rather than rising, one expert in the sector has predicted. Kelvin Davidson, property economist at Capital Economics, explained that because sales under this circumstance are forced, buyers can take advantage of the vendor's need to offload the property.
"Normally you would associate rising transaction volumes with rising prices but, in this instance, it might actually be the case that more transactions and more liquidity result in prices going down, because the position is stronger for the buyer than the seller," Mr Davidson stated. He went on to point out that commercial property values have already experienced slower growth this year than previously and he suggested that prices are likely to remain flat for the next 12 to 18 months.
Earlier this month, the Royal Institution of Chartered Surveyors published research which revealed that investor demand for distressed real estate rose significantly during the second quarter of 2011. However, the organisation pointed out that, despite this surge in interest, the supply of such assets will outweigh demand in many countries, most notably in the Republic of Ireland, Italy and the UK.