MARKET OBSERVATIONS
Date Posted: 28/1/2009
Well, what a strange old year 2008 turned out to be. Perfect timing to start up the new business (again!). It is no secret the volume of transactional business, i.e. agency work, must have fallen by 60% - 70% I would guess. Not quite as bad as the residential market but pretty disastrous all the same. Capital values around the Northampton area however haven’t fallen back by as much as some of the national statistics would have you believe, where a 30% drop has been reported. As usual, Northampton/Daventry/Wellingborough for example have performed much better, partly due to values not having been too inflated in the first place. In my view, values have probably only fallen back about 10% - 15% maximum. As Drake Commercial was only re-established in January 2008, it is difficult to compare our own performance with previous years. Despite enduring the ‘perfect storm’, i.e. the coming together of a UK recession (which did not start in America!) and the so called global credit crunch and banking meltdown, we still managed to effect just over £10 million of agency business. Not bad for a standing start. Deals ranged from the freehold sale of a 140,000 sq ft distribution warehouse in Rugby to the pre-letting of a 5,000 sq ft industrial unit in Hartwell, let before we even printed the particulars. Commercial and industrial property for investment purposes has had a bad press but, providing you did not overpay in the first place, the capital value has probably only fallen about 10% during 2008. Compare that to the value of stocks and shares which fell by about 33%. If you prefer to hold on to your cash and deposit it in the bank that’s fine but choose your bank very carefully. Lehman Brothers, Landbankski, etc. – give me a commercial property every time. The value may go down but it never disappears without trace! And what about your interest rate on those ever so safe bank deposits now that bank base rate has hit an all time record low of 1.5%. Not surprisingly we had keen interest last year in a handful of commercial property investments that came to the market and, for example, in Northampton we recently sold a 3,000 sq ft office building on the Billing Road and a shop on Kingsley Park Terrace. Both were let and income producing and the yields achieved were 6.5% and 7% respectively.