London Office Properties Start To Recover

London Office Properties Start To Recover

Published on 20-10-2009 by Skyscrapernews.com
The latest set of figures published by ING Real Estate Income Trust show that the falling commercial property values are starting to finally be arrested, at least in the capital.

The REIT has presided over some impressive falls on its balance sheet since the credit crunch hit in 2008 with the December 2008 valuation of their property weighing in at a total of £436 million. This fell rapidly to £395.6 million in the first quarter of 2009, £357.3 million in the second quarter and £333.4 million in the third.

Not only is the overall rate of decline now starting to bottom out, but the key capital valuation movements are starting to go positive in a number of sectors with retail leading the way with 4.5% growth.

What's more significant however is the first growth for the office sector in London, albeit at a marginal 0.1% although outside the capital offices are continuing to contract with shrinkage of 0.7%. The biggest faller meanwhile is leisure with a 2.4% drop.

With the office situation now starting to improve in the capital, some funds are already piling in to prepare themselves for the next property cycle, whilst others are taking advantage of the continuing volatility outside London by purchasing property.

Legal and General for example has now completed over £110 million of new purchases that they believe are undervalued and should give them healthy yields such as the House of Fraser department store in Carlisle which promises them a return of 9% and Templepoint in Bristol, currently occupied by Orange that offers a yield of 8.9% thanks to the eight years of rent it's still due.

These figures just go to show that if you're a company with the sort of financial funding Legal and General has, in their case £600 million, you can snap up some real bargains thanks to the continuing disconnect some properties are experiencing between their sale price and true long-term value.

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