Is now the time to invest in commercial property?
Since 2007, the price of office buildings, shops and other commercial property has fallen by 40pc. This week however, Sir Stelios Haji-Ioannou, the founder of easyJet, was reported to be planning to invest in commercial property, based upon the expectation that prices could turn around soon.
Sir Stelios said: “I am tempted to call the bottom of the property market in London. I don’t own any property in the UK at the moment but now I am looking again at London real estate.” The entrepreneur was reported to be setting up an investment vehicle to buy London office buildings at their depressed market prices.
There are others also keeping an eye on the commercial property market in Britain. A specialist commercial property fund has been set up by Eaton Investment Management, the property fund developer, and LLP Services, and this that will seek to capitalise on the market conditions.
This commercial property fund will only be available to those with significant sums to play with, as the minimum investment is £50,000. There are however, other property investments that are open to those with investment capital.
One of the contributing factors for the renewed interest in commercial property is the fact that the weak pound is making British property much more attractive to buyers from overseas. It is hoped that this demand may help to stop the falling prices and turn the market around.
Another reason why investors are looking at property again is because of the rock bottom interest rates. Commercial property funds are currently yielding about 7pc to 8pc, while those who have directly invested in bricks and mortar though buy-to-let are typically receiving yields of 4.9pc for flats and 4.8pc for houses, according to the Association of Residential Letting Agents (Arla).
While certain analysts see these factors as a sign of improvement to the housing market. Many remain concerned that the recession will prevent any swift turnaround.
In the commercial property market, not all are as confident as Sir Stelios in the belief that prices will bottom out. Malcolm Naish, the head of property at Scottish Widows Investment Partnership, suggests that prices in the commercial sector will fall by a further 10pc before turning around.
