Commercial capital property values fell 13% last year as rising interest rates impacted the sector, with industrial units taking the biggest hit.
CBRE'�s monthly figures show values down 3% in December and annual total returns down by 9.1% across the whole sector, wiping about �130 billion from the value of Britain'�s �1 trillion estate of commercial warehouses, shopping centres and offices.
The industrial sector was the worst affected, with values dropping by 21% during 2022, offering total annual returns down 18%. Retail saw capital value growth down 8% and total returns of -2% while the office sector capital values fell by 12% in 2022 and saw annual total returns of -8%. The decline is in sharp contrast with the previous year, when values rose by 13% due to a post-Covid lockdown rebound.
Higher interest rates have pushed up the cost of borrowing, which has impacted the market, a situation which Goldman Sachs expects to continue throughout the year, predicting that commercial property values in Britain will fall by as much as one-fifth by the end of 2024 compared with last summer.
Land Commercial MD Adam Diamant reports that demand is far outstripping supply. Lending has become harder with more restrictions from banks along with higher interest rates, he tells LandlordZONE. 'It'�s not really a market that people are moving into currently, although I know that some residential landlords have shown an interest in moving to commercial.
'The lower end of the market - sub-�1 million - hasn't been impacted that much, however yields at the higher end are being hit and people are wondering whether it'�s worth putting money into property while the cost-of-living crisis is also putting pressure on businesses such as restaurants.'�