While confidence in the commercial property market is continuing to rise, this is not being matched by the availability of freehold assets for investors to buy
This disparity between sentiment and availability is being further compounded by a steep increase in the amount of equity flooding into the UK commercial property market – some £320m in the second quarter of 2009, compared with £185m in the first.
The role of the banks in releasing property and liquidity is therefore critical. Yet the latest data from BDO’s own Commercial Real Estate Review shows that while both property returns and activity levels hit highs not seen for at least 18 months, the number of transactions remains static.
The risk is that moribund bank lending will combine with banks holding back on releasing their property inventory, resulting in an artificial prolonging of the recession for the sector. This is yet further compounded by the fact that many banks are failing to put properties into administration, thereby creating scarcity in the market.
London is proving to be the battleground for this struggle, but the implications could have an impact well beyond the city’s borders if banks don’t act soon.
Solly Benaim, BDO