Turbulent Times for the London Commercial Property Market?

While the high profile sales of iconic London buildings have recently hit the headlines, the commercial property market is by no means clear cut. The value of certain sectors of the commercial property market in London has been decreasing, while other sectors have seen a big boom.

Differences in commercial property values are evident across the capital, and are based on various business and social factors.

A Lowering Appetite for Risk?

Developers at Canada Water, where much of London’s most valuable commercial property is located, have seen the value of land drop by around 11 percent. This is due in large part to investors lowering their appetite for risk in terms of the assets they are purchasing. But this drop in the price of land is in direct contrast to the value of the most popular assets in the capital, which has been increasing.

London Commercial Market in State of Flux

Brexit has made things highly uncertain in the commercial property market, according to experts like Commercial People. But Brexit has not necessarily meant doom and gloom for commercial property, at least not in the short term. As the Brexit vote went through, overseas investors moved into the capital on the back of the pound losing its value. This in turn pushed down yields for the best property in the City.

On the other hand, companies in London have held off on making decisions concerning leasing or buying new headquarters until more is known about the impact of Brexit on commercial property in the capital. But, on the whole, this uncertainty is not connected to iconic buildings like the Leadenhall Building (otherwise known as the Cheesegrater) – the sale of this building was on an unprecedented scale. Other iconic buildings are believed to also show increases in value in the very near future.

The outlook for commercial property in the coming months is extremely uncertain. The UK government says that the commercial property market has “mirrored, to a large extent, the ups and downs of the residential market. The credit crunch effects from 2007 triggered a similar fall in transactions but not to quite the same extent as in the residential market. The trend in non-residential property transactions has been that of a generally flat seasonal cycle between September 2010 and September 2013, but since then there has been a rising trend.”

Many experts are stating that property transactions will continue to decline as the negotiations for Brexit begin after the General Election. The area that will see the biggest impact in terms of downturn will be the prime sector in central London, according to market analysts, as this sector has already been weakened by new residential taxes. Uncertainty in the market can only increase as the negotiations over Europe go on, say experts who are closely monitoring the rise and fall of property in the capital.