Business property prices fall by more than 2% in 2011
Business property prices, including those in the hospitality sector, fell by an average of 2.48 per cent in 2011, according to property agent Christie & Co's Business Outlook 2012 publication.
This followed a marginal increase during 2010 of 0.3%. The average price movements across the sectors included saw a decline of 1.1% in the pubs sector, 4.1% in restaurants and 5.1% in hotels.
At the same time in a market where the demand for quality outstripped supply, Christie & Co saw a significant increase in the quantity of offers made for businesses, particularly in the hotel sector, where the number of done deals also increased. Administrator-led business sales were also more common during 2011.
"Twelve months ago, not even the gloomiest forecaster would have predicted the depth of the recession nor the extent of the crisis engulfing the financial markets, particularly across the Eurozone," said David Rugg, chairman of Christie & Co.
"Therefore, the plateauing of property prices in 2010 must now be viewed as a step towards prices once again settling at a lower level in 2011. However, it should be acknowledged that yield ranges remain on a par with those seen in the 1990s.
"The fact that the market was able to absorb the number of businesses being made available for sale is surely a sign that the market mechanism remains as effective as ever, even as values change. The market has not stuck which is an encouraging signal for what will remain a tricky period ahead of us."
While high-street lenders were in 2011, and remain today, reluctant to provide finance for property deals, Christie & Co is witnessing some optimistic signs for a return of debt finance, new lending vehicles such as Sir George Mathewson's Shawbrook Bank, regional development funds and online loan/exchange facilitators all offering encouragement.
However, David Rugg sounds a note of caution. "We have a slight concern that the majority of funding is aimed at small businesses. Whilst this is heartening for this market, it could leave a drought of debt finance for larger transactions and, crucially, for start-ups which were not well served by the Government's Project Merlin funding."
Looking ahead to 2012, David Rugg says that there is likely to be an increase in opportunities and transactions.
"We can expect a good supply of business offerings early in the year, especially as the banks and their customers will remain committed to dispose of assets in order to reduce gearing. Increasingly we will see the sale of ‘trophy' assets as operators view the value as disproportionate to the commercial return. We've already seen Enterprise Inns, for instance, outline its strategy to off-load some of its best 100 pubs."
With better quality assets on the market, Rugg envisages genuine opportunities for both niche investors - especially those with cash - and new investors.
Christie + Co sees corporate sellers and private buyers increase in 2010 >>
Hotels, restaurants and pub lose around one third of their peak value in 2009 >>
Hospitality property prices drop by 15% in 2008 >>
By Janet Harmer
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