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Mikhail Liebenstein

Things On The Up In Commercial Property

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Went to a Christening today - not my sort of thing as I am very anti religion, but I digress.

At the reception in a local pub, I got chatting to a Solicitor who specialises in Commercial property.

He began saying, oh I'm really busy right now things are definitely looking more positive compared with the start of this year - it definitely seems the market has bottomed out.

I replied, yes I am sure the fast falls are over, but I still reckon there is a way to go.

My wife then started talking about unemployment, they have lost a lot of people at her work.

Our commercial property chap then admitted that they had just laid of about 20 fee earning staff from 100 total ust last week.

Hmmm.......something doesn't compute.

But it was strangely like a conversation with an Estate Agent. As as a commercial property lawyer I wonder where he gets his information from? Perhaps he hasn't yet twigged the correlation between his work going up and them sacking fee earners.

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Commercial property prices do not correlate that directly with residential. Prices tend to fall much more quickly, as values tend to be much easier to compute. (People buy/rent with head, not heart.)

They are said to be 40% down - based on higher yield assumptions, and lower rents. They may well struggle to fall much further.

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Commercial property prices do not correlate that directly with residential. Prices tend to fall much more quickly, as values tend to be much easier to compute. (People buy/rent with head, not heart.)

They are said to be 40% down - based on higher yield assumptions, and lower rents. They may well struggle to fall much further.

Largely agree with you, but

Values holding up depends if rents hold up in the short term

Yields could also go higher in the longer term if borrowing costs rise a lot

However the first factor mainly applies to badly located property, eg. secondary retail and offices

So its a good time to start looking and thinking of buying into REITs in my opinion

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http://www.calculatedriskblog.com/2009/07/...-76-in-may.html

'From Dow Jones: Moody's: Commercial Real-Estate Prices Fall 7.6% In May

Commercial real-estate prices fell 7.6% in May ... The indexes are down 29% from a year ago and 35% from their October 2007 peak.

According to Moody's, CRE prices fell in 8.6% in April (about 16% in two months).

Talk about cliff diving!'

yep,things are bottoming

Is this USA property?

(I didnt want to subscribe to Moody's so I couldnt see the whole article)

Looks like theyare behind UK commercial then?

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http://www.calculatedriskblog.com/2009/07/...-76-in-may.html

'From Dow Jones: Moody's: Commercial Real-Estate Prices Fall 7.6% In May

Commercial real-estate prices fell 7.6% in May ... The indexes are down 29% from a year ago and 35% from their October 2007 peak.

According to Moody's, CRE prices fell in 8.6% in April (about 16% in two months).

Talk about cliff diving!'

yep,things are bottoming

Those figs are US - not UK

June UK improved to -0.9%:

Quote : Wednesday, 15 July 2009 12:19 Daisy Newman News

British commercial property markets have recorded the shallowest fall since August 2007, at -0.9%, according to June’s IPD UK Monthly Index.

But the all property peak-to-trough now stands at -44.1%, while the 12-month change in capital values is -30.8%.

Over this two-year period, the nature of this property recession has shifted from a yield-driven downturn – all property initial yields have moved out from 4.6% to 7.9% – to a deepening negative rental cycle, particularly over the six months to the end of June 2009.

Yield impact, which measures the influence yield movements have on capital values, has followed a correlated "double-dip" pattern, aligned with the two distinct financial market shocks.

At the end of June, the yield impact had retreated to just -0.19% – the smallest monthly figure over the two-year period."

endquote

Not out of the woods yet, but it may be time to hang up the tin foil hat ... ;)

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If they have just laid off a fifth of their workforce, then it stands to reason that the ones remaining would be busier as they have to do the work of the 20 staff that have gone. ;)

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