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Confidence in London Commercial Property Drops

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Confidence in London Commercial Property Drops

By - Monday 09 January 2012

The London commercial property market is experiencing its lowest level of confidence in two years, according to a new study. The survey by Lloyds Banking Group - which examines the views of developers, builders, agents and other industry figures - revealed a decrease in the net balance of experts who believe the sector will grow over the next half-year from 32.2 in August to 2.8, the Financial Times (FT) reported.

Factors such as the impact of changes to regulation in relation to bank lending and the ongoing eurozone crisis have helped dampen sentiment for the capital's office market. "There appears to be a recognition that the challenging economy is going to be here for far longer than anyone anticipated," Lloyds corporate real estate managing director Lynda Shillaw explained.

The survey comes after a report from Jones Lang LaSalle spelled out a mixed outlook for the UK's commercial property market, with little growth expected in the first six months of 2012, but the Olympics forecast to provide a boost in the latter part of the year. Andrew Smith of Aberdeen Asset Management told the FT that while the Lloyds survey "paints a more subdued picture" for London, the city has so far "proved resilient, buoyed by international demand and limited new supply" and "there remains a modest but general appetite to increase property investment".

However, analysts at Morgan Stanley released a research note earlier this week suggesting real estate investment trusts in the UK will experience a five per cent drop in net asset values in 2012, with a further six per cent decline expected next year, Bloomberg reported. The number of properties classified as prime is "highly likely" to fall and overall real estate values could decrease by eight per cent due to a lack of new lending by banks, the note indicated.

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