Monday, December 10, 2007

Crisis in commercial property

The crisis in the other property market

Commercial property funds have been among the top choices for retail investors. But now that prices are falling, a lot of inexperienced investors could be hit hard. And that’s lending an air of panic to the sector…

Posted by mary @ 11:43 AM (647 views)
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2 thoughts on “Crisis in commercial property

  • Commercial property isn’t directly related to residential, but both reflect underlying land values which have risen massively over the last decade. Commercial property values respond faster to changing conditions than residential – people are unlikely to form an emotional attachment to an office block or a shopping centre, in the way that they might be attached to a house. There’s a good quote in the article:

    “At this time last year, talking heads said that commercial property might face a slowdown in 2007. They’d casually admit that the days of double-digit returns were over and investors might see a mere 8% or so return in 2007. These guys, of course, know just fine that 8% is a more than ample return which most investors would happily jump at.
    [What happened instead:] Funds that invest in directly in commercial property have lost 3.6%”

    This is exactly what we’re seeing in the residential property market – everyone agrees the boom days are over, but pundits still harp on about the “soft landing” and a return to more gradual growth. The idea of a crash is anathema to their way of thinking.

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  • Norwich Union got stuffed in the last property crash in the 90’s. People blame Tesco for all sorts of things but if they toilet pensions bye -bye Tesco.

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