UK commercial property values are facing another period of falls produced by bank foreclosure sales.
Barclays Capital says it expects non-UK banks to take the lead in foreclosure sales.
In a research note, Barclays analyst Hans Vrensen said: “Of course, this is after the 45% value decline already suffered and the declines in market rents and lease defaults currently in progress.
“As a result, we expect the CMBS market to go into an extended period of workout and restructuring of existing deals, which will be made more difficult than they need to be by the lack of clear legal precedents on what servicers should do and the challenging fundamentals in the property letting, investment and lending markets.”
Barclays said much will depend on how banks deal with the commercial mortgage loans on their balance sheets as they experience performance problems.
“If banks trigger a large number of loan enforcements and sales of properties from defaulted loans, this could lead to a further leg down for commercial property,” the Barclays note says.
“We expect that the supply of foreclosed loan portfolios will meet only limited demand from private equity and other investors.”
