Hot property

28 November 2007 By Simon Nixon

Sure, the UK commercial property market is in bad shape. As the hot money exits the sector, the spectre of firesales is depressing prices and activity. But current share prices are discounting up to 25% falls in asset values and 6%plus yields. That looks too gloomy.

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British Land, Land Securities and Hammerson, the three biggest real estate investment trusts exposed to the London office market, are trading on an average discount to net asset value of around 40%.

Property consultant CB Richard Ellis said that office supply remained tight across central London. Third quarter vacancy rates stayed at 3.1%, while the supply of readytooccupy space was 6.4m sq ft, the lowest level since 2001.

However, CBRE also said the pace of rental growth in central London had slowed from 6.9% in Q2 to 2.6% in the third quarter.

Deutsche Bank has told investors in its £1.3bn RREEF real estate fund that they will have to wait up to a year to sell units, the Financial Times reported today.

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