Commercial property continues to be smothered in gloom according to total returns figures compiled by IPD. In Europe, the UK is in the vanguard of the downturn, having been alone in showing a decline in 2007 among the major countries.
And in the 12 months to the end of June, the retreat was 14.9% year-on-year according to the latest numbers which came out last week.
Perhaps most concerning is that the outlook is also just as gloomy. The head of Jones Lang LaSalle, a firm which contributes data to the index of offices, industrial and retail properties (hotels are excluded), said this week that he expects the current "calm" to last for the next 12 to 18 months.
But the total returns figures are a compilation of income return and capital return. The problem area is the latter with capital growth diving 2.0% in June alone.
The good news from the hotel trading perspective is that income return – rent – is still rising. It was up 0.5% in June.
This matters because rising rent indicates strong demand for space and therefore strong demand for hotels. Cushman & Wakefield, another contributor to the IPD index, this week unveiled a new method for forecasting future hotel demand on this basis.
In the US, using trading data from Smith Travel Research, C&W found that for every 1,000 sq ft of occupied office space in a particular market, there is a certain amount of occupied hotels rooms per year in that market. There was a 6% margin of error.
Forecasting is thus made easier because occupiers of commercial property sign-up for multi-year leases, and projections can more easily be made than for hotel rooms which are let on a nightly basis.
Where the C&W approach falls apart is in markets dominated by leisure demand or conventions. In such locations, general consumer sentiment surveys or business travel plans are more useful indicators.