In November 2007, Derek Quinlan, Founder and Executive Chairman of Irish investment company Quinlan Private, in a personal capacity, together with Propinvest, a leading private property investment company, completed the acquisition of 25 Canada Square in Canary Wharf, London. The transaction is a 50/50joint venture between Derek Quinlan and Propinvest. Consideration for the transaction was £1 billion. The property is a 42 storey landmark tower which was let, in its entirety, to US banking giant Citigroup. Derek Quinlan, is a former Irish tax inspector and he founded Quinlan Private in 1989.

The UK commercial property market is suffering its worst slump on record and won’t recover until 2011 according to a  report by the Royal Institution of Chartered Surveyors (RICS)*, published today. Price correction from market top to bottom of 50% forecast.

Falls of 25% in prices of offices, retail stores and industrial properties by the end of 2010 are forecast as rental growth falters in response to rising property vacancies during the recession. The fall by 2010 would bring the decline from the market’s peak in June 2007 to about 50%, said the RICS said.

The value falls will exceed those of the commercial property recessions in the 1970s and the early 1990s, according to RICS. Office buildings will lose most value as job cuts carried out by banks and other financial-services companies add to the amount of unoccupied space.

“We are only halfway through the price correction in the commercial property market with values set to fall through 2009 and 2010 as rental declines gather pace,” said Oliver Gilmartin, senior economist at RICS.

Commercial property values will fall 16% in 2009 and another 10% in 2010, the report said. The falling values will be made worse by a lack of buyers as rising loan defaults and more expensive debt curbs the recovery of the investment market, RICS said. Lower interest rates and an improving economy should lift the market in 2011.

“The rapid re-pricing across the market has pushed U.K. yields to among the highest in the developed world with a very wide gap emerging compared to finance costs,”Gilmartin said.

*The report had not been uploaded on RICS' server when we made our post.

Goodbody Stockbrokers analyst, Marina Houghton. commented today: "Today’s FT highlights research from the UK’s RICS, which indicates that peak to trough capital value declines in the UK property market could reach well above 50%, with offices and retail expected to fall 55% and 65% from the peak in June 2007. The double dip we are seeing in the IPD index is driven by falling rents, which are now expected to fall 10% in 2009, 4% in 2010 and 3% in 2011.

The RICS expects capital values to bounce back in 2011 and points to the emerging positive yield gap to the 5 year swap rates due to the “rapid re-pricing” the UK market has experienced. In terms of our forecasts for the Irish banks, we are currently forecasting a 45% decline in values for the Irish market and a 35% fall on average for the UK, a large part of which would be investment oriented. We estimate a move to factor in a 50% decline in values would imply an increase in the property credit charge of some 30%."