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The claim comes as seven years of unprecedented growth in commercial property markets comes to a halt, potentially allowing for a realignment of returns against borrowing costs which Knight Frank cites as a key stabilising factor for the market in the longer term.

Stephen Hodgson, proprietary partner at Knight Frank’s Sheffield office, said:

“Between September 2007 and Christmas, the general consensus is that Britain’s commercial property market will have lost about 11% of its value.

“Sentiment in the commercial property investment market is probably split 50/50 between pessimist and optimist, with the former sat on their hands, but the latter starting to dip their toes in the water, albeit very cautiously because they perceive real value out there.

“Many of us have witnessed the rollercoaster of the property market on a number of occasions. However, the strange thing at present is that the economy is fundamentally strong and particularly in Sheffield, current circumstances are incomparable to the dark days of huge redundancies and smoke stack industries.

“Sheffield’s economy has diversified hugely since previous recessionary times, making it far more robust. Also, the fundamentals of long term investment in commercial property are still extremely strong with the twin benefits of both rental and capital growth comparing favourably with the equally volatile stock market. Sheffield is very fortunate with the timing of this lending crisis as many of the current schemes are off the drawing board and under construction.

“I personally expect markets to remain slow until the middle of 2008 with gradual improvements taking place. By then, book values of commercial properties will have been reduced, which will contribute to an easing of the market. One huge benefit of this will be to keep supply under control and more in line with demand.

“Conversely to the investment markets, occupational markets have been good over the last 12 months, and we expect this to extend into the New Year, when substantial new stock comes into the market place. We should also see a number of notable completions for relocatees or inward investors becoming available.

“Another consideration for Sheffield is that many of the schemes coming to fruition now are beneficiaries of Objective 1 support which has now finished, and this will have the impact of depressing the medium term supply - i.e. the next wave of speculative development, which should stem oversupply.

“The best of these schemes are attracting occupiers quite readily, for example the next phase of office development in the Heart of The City project which is currently under construction, has already attracted a number of companies 12 months ahead of completion.”

Another significant plus for Sheffield moving forward is the creation of space for digital industries through the schemes like the Digital Campus, which Knight Frank sees as an area in which Sheffield can score over competing key cities.

Stephen added: “As to whether the record low yields achieved prior to September 2007 can ever be achieved again, this is perhaps a more difficult debate. What is clear is that Sheffield’s living accommodation, transport issues, environment and health of the city centre are all part of the rich mix that is required and the city needs to focus on that to keep moving forward.”

by: Editor

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