Monday, February 04, 2008

commercial property crunch - bad news for regeneration?

The commercial property market's been sliding over the past year (Times, Telegraph) - what's happening is that:

  • Asset values are decreasing
  • Shares in property related stocks and funds have fallen
  • Restricted debt availability means less means to fund buys or new developments

Basically demand has slumped, the supply of capital has shrunk, and there's a lack of deal flow which has deflated confidence. The commercial property market has had a long boom, and probably over reached itself some years ago. The market seemed to be saturated with investments and assets years ago.

Its bad news for regeneration

For some cities who are still awaiting redevelopment of their centres of docksides, there might be no investment funds, and changes to the risk climate might have now pushed them out as a viable development project.

And then there's the developments in progress. Could a developer go bust? maybe - British Land have seen 10% wiped off their asset value recently.

Developers have got a lot more sophisticated over recent years. They really understand the local differences in UK markets much better than in the 1980s and 1990s. However, their appetite for risk is different now.


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