A report by property consultant DTZ concludes that the prime London City office market is the only key office market globally to offer investors attractive returns at current values.
The report called Money into Property report predicts that further pain in commercial property prices is yet to come, as property prices will continue to slide globally through this year and will only stabilise during 2010.
But according to the firm, the prime London City office market is the only key office market globally to offer investors attractive returns given current prices, though London’s West End, Madrid, Paris and Sydney will reach fair value sometime later this year. Meanwhile Frankfurt, New York, Shanghai and Tokyo will not represent attractive investment destinations until 2010.
Tony McGough, global head of forecasting, said in a statement that the full open “hunting season” for investors is not yet underway, with the majority of markets still needing to undergo further “pain” before they reach fair value. “This picture will start changing in the second half of this year, with markets gradually becoming attractive, though some key markets will only reach fair value in 2010,” he said.
Total office returns will be around -20 percent in 2009 and will be zero or slightly positive next year, notching up to above 10 percent from 2011 onwards.
The report goes on to show that cross border flows of capital have fallen by 58 percent over the past year, from $211 billion to $89 billion. The Middle East is the only region which has increased its investment into other regions (while all other regions saw a reduction in cross border investment.