Commercial market remains in the doldrums, according to JLL report

Commercial market remains in the doldrums, according to JLL report

The commercial property market remains in the doldrums with the latest index from Jones Lang LaSalle showing the key indicators all in negative territory.

Although overall returns were marginally higher – up 0.1 per cent in the three months to the end of June – capital values in the same period were down a surprisingly high 2.3 per cent, income was 2.5 per cent lower and rental values were back by 1.4 per cent.

The findings will surprise and disappoint many given the positive results in the first quarter when rental income was up by 1.6 per cent and rental values were 0.7 per cent higher.

While capital values declined in all three property sectors (offices, retail and industrial), the greatest fall was in the retail market which slipped by 2.9 per cent – compared to a 1 per cent fall in the first quarter of the year.

The worsening results here underline the serious difficulties facing the retail sector because of the reduced spending power of shoppers and the fall-off in bank lending.

Capital values in the office and industrial sectors fell by 2.3 per cent and 0.5 per cent, respectively, but at a slower pace than in Q1.

Meanwhile, rental values dropped by 1.6 per cent on retail property and by 1.4 per cent in offices while industrials largely remained static.

Hannah Dwyers, research analyst at Jones Lang LaSalle, said the main driver of the decline was rental values and fears around occupation, vacancy costs, voids and rental levels.

On a broader front, she said the index results reflected the negative sentiment in the macroeconomic environment in Q2.

“This sentiment seeps through to occupiers and rental values, and affects investor confidence,” said Ms Dwyers.

She said the moves towards a resolution of the euro crisis may improve sentiment while a pick up in the volume of transactions could help stabilise pricing if it occurs in the remainder of 2012.

Source: Jack Fagan /

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