Survey for 2011 Predicts Property Dip

UK commercial property values are likely to dip again next year as the poor economy and continued rental weakness curb a strong price recovery seen for 2010, a survey showed.

Property experts polled this month expect prices to decline by 0.6 percent in 2011, compared with predictions of a 2.2 percent rise just three months ago, the Investment Property Forum (IPF) said in its quarterly report.

The price outlook for this year is significantly improved however, with average values seen rising 5.9 percent against the previous prediction of 2.4 percent, said IPF, which surveyed 29 fund managers, property advisors and equity analysts.

British commercial property values fell 5.6 percent over the whole of last year, although prices have rebounded since July including a one percent rise last month, figures from the Investment Property Databank (IPD) showed.

Real estate experts warned last month at an industry seminar the recent upswing in investments in UK commercial properties masks uncertainties and risks that hit the recovery, urging caution when investing in the market.

"There is little evidence of any expectation of occupier demand driving rental growth until 2012 ... weak rental value growth forecasts across the sectors are understandable against a back drop of continuing weak economic data," IPF said.

Forecasters in the IPF survey expect average rents for offices, retail, and industrial properties to fall 4.4 percent in 2010, and to remain almost flat in 2011 with just a 0.1 percent rise before improving 2.4 percent in 2012.

Capital values are also seen rising 2.3 percent in 2012, said the IPF survey, which was funded by top UK property companies including Land Securities (LAND.L), British Land (BLND.L) and Hammerson (HMSO.L).

Total returns from commercial properties -- which comprises rental income and capital growth -- would hit 13.4 percent this year, before falling back to 6.6 percent in 2011, and 9.1 percent in 2012, IPF said.
Reuters