Report: UK To Suffer Most in Subprime Crisis

LONDON-Among European markets, the UK will bear the brunt of the subprime crisis, however, commercial property remains a sound part of investment portfolios. So says a new report by the British real estate investment advisory firm Strategic Real Estate Advisors.

The report, called “the effects of the subprime crisis on commercial real estate markets,” written by Dr. Lutz Luithlen and StratReal researchers, recommends that investors take a long view of their property investments and diversify the risks in their portfolios. The report also advises investors to look for properties with sound fundamentals and to avoid excessive leverage.

Although many experts disagree on their future predictions for capital markets, most experts remain fairly sanguine about the fundamentals of commercial property, this study finds, reporting that some trends can be safely anticipated. For example, there has been a rise in the cost of short-term debt, banks curtailing their lending, and a tightening of lending criteria. “We have also seen a growing aversion to risk among investors together with rising risk premia, as well as a clamoring for greater transparency and less complexity,” according to the report. For property investors, that means a more critical eye toward valuations and the resale value of property, it says.