Coronavirus: Commercial property prices set to plunge 14%

·2-min read
Offices in Canary Wharf, London. Credit: Getty.
Offices in Canary Wharf, London. Credit: Getty.

Some £230bn ($289bn) could be wiped off the value of UK commercial property as employees continue to work from home in the wake of the coronavirus pandemic.

Predictions from the Office for Budget Responsibility (OBR) forecast a fall of nearly 14% in the price of offices and commercial buildings this year.

The boom in online shopping together with a shift toward remote working has created lower demand for retail and office spaces.

OBR predicts prices will fall by 13.8% in the 2020-21 financial year before slowly recovering, rising by 0.9% in 2021-22, up to 2% by 2024-25.

Credit ratings agency Moody's says the trend will create 'credit negative' for commercial landlords such as Land Securities and British Land.

READ MORE: Coronavirus: Unions call on Johnson for clearer workplace guidance

Ramzi Kattan, vice president at Moody's, told the Daily Mail COVID-19 had “turbocharged” pressure on traditional retailers and office-based firms.

Although some businesses may need more office space to comply with social distancing rules the trend toward home working will outweigh this, warns Kattan.

“We have had the biggest work-from-home experiment ever during the pandemic and it has gone surprisingly well for most businesses. So we think many companies will now be re-examining their requirements for space and, over time, that is going to hurt demand – especially in large cities,” he added.

Large firms including Barclays (BARC.L), Vodafone (VOD.L), Facebook (FB), Twitter (TWTR) and Unilever (UL) have announced plans to allow staff to work at home more frequently and in some cases permanently.

Meanwhile high street retailers including Boots and John Lewis plan to close shops across the UK.

“Because of COVID-19 there is also going to be a worse economic environment and that is also going to reduce demand for offices. Retail is going to bear the brunt and offices will be hit too over the longer term,” said Kattan.

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