Over the next two years commercial property capital values could fall by a further 25% taking the peak to trough declines to at least 50% - thanks to by a sharp drop in rents, says RICS' commercial property forecast published today.
RICS expects the commercial property market to see at least 16% declines in capital values in 2009 and a further drop of up to 10% in 2010. Since the onset of the credit crunch in June 2007, capital values have already fallen 25% and with more falls to come, the cumulative downturn in prices will exceed the downturns experienced in both the 1970's and 1990's. Rising defaults and credit spreads will constrain a near term recovery in financing, preventing any recovery in the investment market over the next couple of years. Low interest rates, recovering global growth and improving valuations relative to other asset classes should see the downturn gradually begin to reverse on 2011.
The biggest declines are likely in the office sector with capital values expected to drop a further 30