The number of property development completions halved in 2012, according to the latest IPD UK Developments report. With more and more projects being left abandoned, new space levels in the UK have hit their lowest point in over 30 years.
A lack of both financing for developments and investor confidence in the wake of the global economic crisis has meant that, in essence, only those who have secure financial backing or have been able to pre-let have been able to continue new building plans.
Phil Tily, IPD managing director for the UK and Ireland, said: “It has not come as a great surprise that the number of development completions in 2012 is the lowest on IPD’s record. With the average construction duration now between two and three years, we are now seeing completions of those developments that would have started in 2009 and 2010, arguably the most difficult economic period, and when traditional finance providers were not lending on developments as occupier and investor demand was constrained."
It was not all bad news however, as returns for finished assets actually increased to 7 per cent in 2012, the highest level since 2007, whilst bonds and equities returned 4.7 per cent and 10.2 per cent respectively for buyers. On average, the commercial sector had returns of 3.4 per cent.
Only 40 commercial property developments were actually completed in 2012, according to the report.
Generally, between 1983 and 2012, the top 25 per cent of properties were able to offer buyers a 10.5 per cent return on investment, whilst even the bottom quarter performed reasonably well at 0.3 per cent.
The findings are based on the IPD UK Annual Property Index which looks at 50 per cent of the commercial property market in the UK and the performance of developments.