Commercial property values rise despite drop in completion rate

Commercial property values rise despite drop in completion rate

It’s been a strong start to 2017 for the commercial property market. Values are continuing to rise, despite a high volume of transactions failing due to Brexit uncertainty.

The monthly index by CBRE highlighted that the commercial property market got off to a flying start in 2017, with values jumping 0.3% in January and rental values also showing positive growth.

‘Cautious Optimism’ for the UK Commercial Property Market in 2017

Commenting on the market performance, head of research at CBRE, Miles Gibson said:

“Following a positive end to a turbulent 2016, January saw a relatively solid start to 2017, with industrials continuing to lead the way”.

The figures followed a healthy final quarter, in which values rose 1.4% and 0.6% in December. January’s total returns were down from a particularly strong December, and were still healthy at 0.7%.

However, whilst commercial property values have been promising, the uncertainty posed by Brexit are still having an effect on deal completion rates.

“Deals have taken longer to complete and a greater proportion have been withdrawn but, on the flip side, values have held up remarkably well, reflecting the UK’s strong fundamentals,” said Jason Winfield, head of UK investment at Cushman & Wakefield.

The comments follow findings that a quarter of the value of all commercial property deals since June 23rd, the day of the EU referendum, have fallen through as investors have become more anxious about the market climate.

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Approximately £3.5bn worth of deals have failed to complete since the day of the referendum took place, despite values maintaining promising growth. The findings show that completion is occurring at an average of 3% below asking price.

Whilst completion rates are starting to increase – approximately half of the deals have now completed, plus 15% now under offer – Jason Winfield still points out that “we do not know the full implications of the UK’s decision to leave and how that will manifest itself in occupational markets”.

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