Commercial property values fall 27 percent in 2008

LONDON (Reuters) - Commercial property prices slipped 4.9 percent in December, taking the market's total 2008 decline to 26.8 percent, data from the world's biggest property broker CB Richard Ellis showed on Friday.

Commercial properties are now on average 35.5 percent cheaper to buy than at a summer 2007 market peak, according to the CB Richard Ellis Monthly Index.

CBRE -- one of the biggest contributors of data to benchmark index compiler Investment Property Databank -- said a correction in UK retail, office and industrial property prices slowed in December after a record 6.6 percent drop in November.

Total returns, which comprise rental returns and capital growth, fell by 4.3 percent in December, slashing the annual all property return to minus 22.1 percent on-end 2007 levels.

All Property yields ended the year at 8.6 percent. All Property rental values declined in December by a further 0.8 percent, taking the 2008 fall to 2.4 percent.

"The second half of 2008 has really seen the credit crisis hit the commercial property market with a desertion of occupier demand and shaky investor interest," said Peter Damesick, head of UK research at CBRE.

"This has caused a severe correction of capital values with rental levels starting to follow," Damesick added.

Investment activity in the property market has shrunk dramatically in the last 12 months as credit-starved buyers moved to axe acquisition plans.

But Damesick was optimistic that Thursday's historic cut in the UK base rate to 1.5 percent could lure new investors back to the market.