U.K. commercial property companies offloading assets

Posted under General by Jermaine

Virtually unobtainable credit, job cuts in the financial sectors and other industries, and tough economical conditions are forcing UK commercial-property companies to sell assets and put all developments on hold.

The country’s real-estate giants, including the biggest commercial developers British Land PLC and Land Securities PLC, have together sold £5 billion of assets throughout this year. There are many more that are following the same route to protect themselves from financial upheaval.

The sale of assets is aimed at reducing debts and positioning themselves against future market slumps. New developments of commercial properties are on hold since businesses are unable to obtain finances.

According to British Land’s Stephen Hester, the situation could take a few more months to improve. Industry experts believe that after 2010, developers will only be able to work on a few major projects, since obtaining finance for speculative development would still be difficult even if fund availability improved in 2009. The experts say that speculative developments only increase when commercial-estate markets are doing exceptionally well.

According to Jones Lang LaSalle, a real-estate investment consultant, delivery of high-cost office space to the market would fall to 2.66m square feet in 2009 and shrink by 50% to 1.52m square feet by end 2009.

Analysts are predicting additional fall of 10% in rents during next 12 to 18 months which would further discourage new development projects.

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