Fears over the commercial property market were mounting yesterday after London-based Delek Global Real Estate pulled out of a £1.4 billion deal to buy a large European property portfolio.
The City is already reporting that commercial property transactions, particularly those relying on large borrowings, are stalling after prices began to fall earlier in the year.
One of the most prominent examples of this is the rumour that Renzo Piano’s Shard of Glass scheme in south London has hit delays due to one of the three backers, Simon Halibi, being unable to borrow the required cash to go through with the scheme.
JP Morgan yesterday lowered its forecasts for the market, estimating that valuations could drop between 12 and 15 per cent in the next year.
Speaking to the Financial Times, JP Morgan analyst Harm Meijer said: ‘The market is pricing in a crash akin to the early 1990s, with a perceived drop of 25 per cent or more.
‘It is not whether the markets are coming down, it’s whether the drop will be 10 per cent or 20 per cent, and we think somewhere in the middle.’
The news comes just over a week after the AJ took an in-depth look at the commercial property market after the sub prime loan crisis in the US (AJ 18.10.07).
Speaking to the AJ then, chief executive of British Land Stephen Hester said: ‘This is a price correction and not a drama. After about 10 years of growth it is not a surprise that this happens. The turbulence in the financial markets has accelerated the correction.’