COMMERCIAL property values across the North-East have fallen by about 25% since the start of 2008, when the credit crunch started to bite, according to property consultants King Sturge.

“Values are expected to fall further as would-be buyers continue to find it hard to access affordable finance,” said King Sturge valuations partner, Roger Speirs.

“Buyers who can obtain finance are reflecting the increased cost of borrowing in their bids, which is further driving commercial property prices down. Others are waiting as they are fearful of buying early in a market which they expect to fall further.”

However, Mr Speirs, who advises banks, developers and owner-occupiers on property values, says the last few months have seen renewed activity from buyers who want to snap up quality properties before an anticipated investor rush when the market bottoms out.

For example, in December King Sturge advised on the acquisition of the Abbey National unit on Northumberland Street and The Environment Agency offices on the Newcastle Business Park.

“The view of these buyers is that if a prime property becomes available, they will buy it, even knowing values are likely to fall further, as they may not get a chance to buy a block of the same quality again and it will provide an income through rent.

“There are also buyers who do not require finance and the current market, where there can still be decent returns, is looking attractive to them as interest rates fall and equity markets remain depressed, hitting returns from bank deposits and shares.”

The result of these factors, says Mr Speirs, is a ‘flight to quality’.

“While two years ago virtually any commercial property was considered a good investment, key criteria such as location, quality of accommodation, the covenant provided by the tenant and the prospects of the property being let quickly if it becomes vacant, or easy to sell, are more crucial than ever.”