Commercial property prices drop again

Commercial property prices have fallen for the ninth consecutive month in a row according to data from Investment Property Databank Ltd.

Between June and July, the average value of stores, offices and warehouse dropped by 0.4 per cent, led by declines in warehouse properties. The total return from real-estate values and rental income, however, was up to 0.2 per cent in July compared with 0.1 per cent in June.

Phil Tily, managing director at IPD, said in a statement: “The difficulty for asset managers and investors remains in finding secure tenants for these discounted properties, a considerable challenge while the government's austerity cuts curtail growth.”

The state of the wider economy appears to be to blame for the poor performance of commercial property as even the values of office buildings in the City of London financial district fell, leaving the capital's West End as the only region in the UK to record consistent growth.

Despite the recent decline in property values, the sector as a whole has seen cumulative growth of over 36 per cent in the past three years, only tailing off over the course of the past 12 months.

The index is compiled of appraisals from 3,585 properties valued at £33 billion at the end of July.

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