Byline: Steve Pain
The commercial property industry has been warned to snap out of its current mood of panic and fear.
Experts believe that occupier demand will hold the market - if the industry doesn't sit on its hands and talk itself into a recession.
According to property consultancy Lambert Smith Hampton (LSH), the current market downturn is entirely due to yield/price adjustments and little to do with an underlying weakening in occupier markets.
Property data published within LSH's latest research, LSH Weather Map Report: Prospects for Property 2008-2011, demonstrates that current property market fundamentals are more reminiscent of the 1970s market downturn than the 1990s crash.
LSH's head of research, Dr Arezou Said, says: "If the commercial property market takes the time to analyse current and historical market data, it will find its present fear will turn to educated caution.
"Yes, we are expecting capital values to fall by a further 10 to 12 per cent this year but the extent of the fall in the investment market resembles that in the early 1970s rather than the 1990s.
"Occupier markets are also more balanced than they were in any previous downturn and we have a tighter development pipeline than in either period.
"The message is clear - let's be cautious but not afraid.
"Panic and idle hands will risk the health of the property market but value can by found through educated and informed activity that responds to tenant demand and rental growth. This will see the sector through the present uncertainty."
Terry Corns, head of office at LSH in Birmingham, says: "The picture here in Birmingham remains bright, particularly with rents forecast to increase in both the office and industrial markets."
According to LSH, office rents in the Birmingham area will rise by 4.6 per cent to pounds 34 per sq ft and industrial rents by five per cent to pounds 6.25 per sq ft. Only prime retail rents will remain static, at about pounds 325 per sq ft.
According to the research, data analysis of the 1970s, 1990s and present economic and property market conditions reveals the following:
2008 to be the bottom of the investment cycle. Recovery in total returns is expected from 2009, although not likely to get back to double-digit returns of the previous two to three years.
Development has increased but not on the scale of the 1970s or the 1990s, and the credit crunch will constrain development further. This will reduce the threat of a substantial over-supply and will help to maintain rental growth.
There are no indications that the economy will experience negative growth. …