I often compare the current state of the commercial property market to a ship in the middle of a very bad storm. The outlook looks grim, there is no-one around to lend a hand, your options are limited, you have very little control of where you are going to end up and the prospects of surviving look slim. Now that analogy may seem rather harsh, dark and unreasonable but from where I am sitting, where I deal with 25-100 callers each day, and from the numerous opinions and views which are expressed to me by other investors as well as agents, the commercial property market is still in a very poor state indeed.
All investors today buying commercial property seem to want 1 of 3 things; they want to buy either prime investment or development property in central London, prime investment property outside central London which is let to substantial companies on leases in excess of 10 years or prime development property outside central London which has planning consent where the price they are paying is no more than 25% of the end value of the completed development. What investors do not seem to want to buy today is secondary investment property outside central London which is let for 2-3 years to sole traders. As for vacant property, well most investors do not even give these a second thought as there is more chance of making a profit by gambling in a casino then there is buying vacant secondary commercial property in the UK.
As with most markets, including the commercial property market, everything should eventually sell within a reasonable period of time where the price is determined by demand and supply and the availability of equity. Unfortunately, the key components of the commercial property market are absent in an increasing number of cases which prevents people from selling. Many investors simply do not want to buy secondary/vacant property which means the demand isn’t there. With those who do want to buy, they are unable to do so as they are unable to access equity as banks are still not lending. Finally, where there is a willing seller, a willing buyer and the availability of cash, the parties are unable to agree a price as sellers’ aspirations on price are still out of kilter with the market and buyers are simply not prepared to pay the prices being sought.
Commercial property has always been a difficult business which has become harder since the recession/crash arrived on all of our door-steps in 2008. The commercial property market will recover, although not for many years, and the recovery will be long and hard. I suspect that before things start to get better, they will get worse and so anyone currently holding commercial property who is looking to sell or who has to sell should adjust their price expectations in line with market conditions and give serious consideration to any genuine offers received.