Friday, Dec 08, 2006

Commercial property maxed out

The Economist: Commercial property: Braced for impact

Yet this boom seems to have gone too long. Property prices are rising so fast that they have run away from rents and driven yields to a record low of 4.7%. That is about 0.5 percentage point below the cost of borrowing (see chart), as clear a sign of a bubble as any. And officials are starting to worry. Nigel Jenkinson, executive director for financial stability at the Bank of England, warned in a speech on November 30 of the risks to banks of a sharp adjustment in property prices.

Posted by sold 2 rent 1 @ 01:04 AM (546 views)
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1. monty said...

Annecdotal evidence I know, but my impression is that the cranes have been on the London skyline since the late 90s. I find the amount of construction going on in the City to be a real eye opener and have often wondered just who is going to occupy all that shiney new office space given the competition over at Canary Wharf yet somehow they seem to fill up just as fast as they are built. There's no doubt that the phenomenal poliferation of hedge funds has got something to do with it.

At the moment, most of the To Let signs seem to be on those rather shabby looking smaller buildings with the Georgian facades. Once the signs go up they stay there too.

Friday, December 8, 2006 09:41AM Report Comment

2. tyrellcorporation said...

Prestigious offices in the centre of Exeter have been empty for two years even after an extensive mid-term refurbishment and re-brand. It always amazes me how long these commercial letters can absorb void periods.

London has the enormous Paddington basin complex almost done and the next 'biggie' will be the Kings Cross area which is going to be raised. Phenominal investment but as this article points out the risks are also huge.

Friday, December 8, 2006 11:36AM Report Comment

3. paul said...

This always happens towards the end of a property boom. Canary Wharf was empty for quite some time after it was built, because while the funding for the development was made at the height of the last property boom, the completion of the project coincided with a sharp downturn.

Its not just the shabby offices which are standing empty either. Walk from St Pauls to Farringdon via The Barbican and you'll see a lot of smart office space wanting for occupiers ...

Friday, December 8, 2006 11:43AM Report Comment

4. Bricksandmortarhaha said...

Head over the river to Southwark/Bankside and you'll see loads of HUGE new buildings going up there too. The monstrosity opposite Southwark Station is finished but seems utterly deserted - looks like they've only managed to let out one floor.

Best of all, the building boom is being matched by the creation of a glut of residential 'executive apartments'. Can't wait for all those two-bedroomed flats to come on to the market at once . . . the carnage will be sweet to behold.

Friday, December 8, 2006 01:00PM Report Comment

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