Commercial property deals slump by two-thirds to less than £1bn

Published on Thursday 18 December 2008 20:38

INVESTMENT in commercial property in Scotland has suffered a dramatic £2 billion slump this year, new figures have revealed.

There were only about 850 million worth of deals done north of the Border in 2008, compared with nearly 2.9 billion in 2007, the latest research shows.

The two-thirds reduction in the value of deals underlines the effect that the credit cruch has had on the commericial property market.

And according to Jones Lang LaSalle – the property firm that produced the figures – Scotland is in a worse position than the UK as a whole, which suffered a fall of 55 per cent in 2008, to about 21bn.

JLL revealed that in 2008 in Scotland there were only two shopping centre property transactions, worth about 37.9m, down from nine in 2007.

Deals ground to a halt as a result of both a collapse in lending – with banks such as HBOS unable to back buyers – and unwillingness on the part of sellers to allow prices to fall too far.

Alasdair Humphery, managing director of the company in Scotland, said that average values in Scottish commercial property had fallen by about 40 per cent but that this "correction" lagged behind those for the whole of the UK.

Humphery told The Scotsman: "It has taken until recently for pricing in Scotland to show some flex. Now we are seeing significant value changes and that is attracting buyers back in."

He refused to call the bottom of the commercial property market, but said there were still deals being done. Lenders like Clydesdale Bank and Royal Bank of Scotland were still backing buyers, albeit with much higher loan to value ratios, he maintained.

And he predicted that the market would start functioning "more normally towards the middle of next year".

Properties currently up for sale are likely to be forced sellers meeting demands of lenders or funds meeting redemption calls.

Humphery continued: "We wouldn't advocate selling in this market unless you have good reasons to do so. For the experienced investor, this is a good time to be a buyer."

The latest setback for commerical property market came as Scottish housing and commercial property developer J Smart yesterday warned profits would be hit further next year by the collapse in property values.

The Edinburgh-based group, listed since 1965, admitted that unless the trend turned around before the end of its current financial year, the revaluation would dent profits. The company's share price was unmoved, although at 377.5p it remained at its lowest point this year.