The US subprime crisis is putting the brakes on Britain's commercial property boom, driving down real estate values and putting banks in jeopardy.
Market fundamentals have indeed changed quite dramatically for commercial property. One indicator is the so-called "average prime yield," which has risen during the past year -- a sign of cooling demand and weakening returns on property investments. Data from realtor CB Richard Ellis show the underlying price of real estate assets in Britain has declined relative to rents, causing the yield to rise. It climbed 50 basis points, to 5.7 percent, in the fourth quarter of 2007 -- some 90 points higher than during the same period in 2006.
