Is the UK Commercial Property market good value?
A quick and easy metric to determine if property is good value is to compare the yield on property to the comparable yield on government bonds. Currently, in the UK, the yield margin is at the highest level it has ever been at more than 4%. UK commercial property yields are now back at levels last seen in the early 1990’s. Prices have corrected sharply and swiftly, falling more than 40% in just under two years. This compares to a 32% correction following the last recession in the 90’s which played out in just over three and a half years. The decline in prices has been accelerated and accentuated by the problems in the financial markets. Despite limited transactional data, valuers are now reporting that yields are stabilizing in some parts of the market, particularly yields for higher quality assets with strong tenants on longer leases. Similarly, in the transactional market there is a rapidly changing equilibrium with less distressed selling and more buying. Consequently, the prime end
