Commercial property prices in Britain could fall as much as 15% this year, the giant insurer Aviva which manages billions in investments in Britain and Ireland, has said, providing the first insights into how Irish commercial property prices will likely fare in the coming months amid the Covid-19 economic storm.
Aviva is one of the UK’s biggest commercial property managers in Britain and Ireland and its predictions make for gloomy reading on both sides of the Irish Sea for the prices of offices, retail and industrial properties.
In its earnings update, the insurer said UK commercial property prices could fall by 15% because of the impact of the pandemic, although it still sees better prospects for residential prices in Britain in the long-term after home prices trough.
The coronavirus is threatening property values as businesses are forced to close to limit its spread and unemployment soars in Britain and Ireland.
The amount of rent collected by landlords in the UK fell sharply in March and is likely to plunge further after the government limited landlords’ ability to evict tenants.
Aviva’s property assets platform, which includes property and infrastructure investments, managed £45bn (€50.3bn), as of September last year.
In Ireland, the share prices of Irish property companies and the Irish banks have reflected the economic fallout from the pandemic here.
Property companies Hibernia Reit and Irish Residential Properties Reit, or Ires, have both slid 25% since the start of the year.
Aviva said it expects residential property prices in Britain to drop 12%.
That decline is the same as the drop in Irish residential prices predicted under some economic scenarios by KBC Bank Ireland and the Economic and Social Research institute in recent days.
The ESRI research said that the long-term supply of new home builds here will fall back because of the lock downs to building sites and continuing health restrictions as the sites open up again.
Aviva also said it expects to pay out around £160m in coronavirus-related claims.
Insurance firms can expect to face at least $203bn (€185bn) in losses this year as a result of the virus, according to Lloyd’s of London.
Claims relating to business interruption and event cancellations have already begun to be filed, and firms including Allianz, Munich and Swiss Re, have all warned that their profits will be hit.
Additional reporting Bloomberg