Investment in UK commercial property hit a new low in the second quarter as it tumbled below the struggling Irish market, according to IPD.
In its quarterly report, IPD found that net investment in property outside London was -£161m for the three months to the end of June – the first time it has been negative since 2009.
This means the amount spent on investment, development and refurbishment of offices, shops and warehouses has plummeted reflecting the level of confidence investors have in the future of the economy.
IPD said that weak consumer demand and beleaguered local industries meant that commercial property in the regions is discounted by up to 45% from pre-crisis levels.
Swansea, Derby and Plymouth have seen the steepest declines in property values, with each city seeing a fall of more than 40% since 2007.
All but three of 30 cities outside London measured by IPD saw value declines of more than 1%.
Aberdeen was the only city outside London to register value growth of more than 1%.
The struggling regions meant that the overall performance of the UK was now weaker than the Irish property sector for the first time since 2008.
Even in London, where values continued to rise in the quarter, growth slowed to just 0.4%, down from 1.6% in the same period last year.
Investment from UK funds into the capital has dwindled in the last year, as UK-based buyers are finding themselves priced out of traditionally volatile markets that have taken on the status of safe havens for international investors.
The number of purchases of City offices, one of the most volatile of the London markets, fell by 43% in the year to June from the same period a year ago.
IPD managing director Phil Tily said: “Without investment in offices, shops and warehouses, communities will not be able to recover from the current economic woes. First we’ve seen the collapse of construction and now we’re seeing a regional squeeze on commercial property. Investing into regional real estate is too risky for institutions and unless we see consumer demand pick up, that isn’t going to change any time soon.
“For those investors willing to take a punt, the UK regional markets offer considerably better value than in London. However, local occupier demand remains extremely low, in part due to the chancellor’s austerity cuts, and for that reason property funds are holding back from investing their money into the regions.”
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Sophia.furber@estatesgazette.com
