Commercial property prices in major cities suffered a steep decline during the second quarter, affected by various factors, according to WSJ. The slowing down of global growth, as well as the trade tension happening between China and the US, has been cited as major reasons behind it.
Property prices were lower during the second quarter, transitioning from the first quarter. From Hong Kong to Seoul, to London, and Washington, D.C., these prices were seen going down, according to Real Capital Analytics data. Paris' commercial real estate fell down the most among the markets which belonged to Europe.
Paris' markets fell by about 2.6% during the quarter. Prices in Central Chicago, meanwhile, declined by 2.1% making it the worst US performer in real estate. Australia also suffered a 2% decline in property prices in Melbourne and Central Sydney. The territory has been slowing down ever since it fell sharply in mid-2018.
Jim Costello, the senior vice president at Real Capital Analytics, said that the investors for this real estate were "less hungry" to take on risks, especially in the market atmosphere right now.
The UK housing market is a good barometer for how the global commercial real estate market is reeling. It is at its weakest point since the global financial crisis, with Brexit concerns an extra factor affecting the British commercial property market, The Guardian reported.
Reports from analysts and commercial and residential property marketer Savills have said that fewer houses were sold in the UK for the first half of 2019. They compared this data from any other point since the year 2009 rolled around.
London led the sharp decline, where prices have fallen after years of "rapid inflation." Prices of London homes sold by Savills have fallen to 32%, to £2.1 million, during the first half of 2019 in contrast to the same time last year. The real estate company has shifted to more affordable homes in order to overcome a weakness in "prime properties."
Hong Kong had problems of its own, but it also shared the weakness which the UK market mirrored. Office investments in the region fell by 34% year-on-year while the Asia-Pacific region was still covered by the uncertainty between the US and China.
Cedrik Lachance of Green Street's REIT research said that this economic backdrop proved difficult for real estate companies in the US, but there had been "slow, steady growth." He said property prices in the US will be flat in the next 12 months but lower interest rates might help offset a slowdown in growth and the fears of risks that investors have displayed.