The number of property investment companies going through the insolvency process has more than doubled since 2011.
Research from commercial law firm EMW discovered that there were 346 insolvencies in the second quarter of 2015, but only 154 in the same period of 2011.
“Ironically, the rise in insolvencies is down to the improved property prices, rather than an indication the market is in trouble,” explained Geoff Willis, principal at EMW. “Higher occupancy levels and rental increases, especially on office investments in London and the South East has driven up prices.
“Banks have been holding onto these sour loans since the credit crunch struck and are using this opportunity to recoup some of the value tied up in this bad debt.”
EMW calculated that the average rent for office space in London’s West End had shot up by 22 per cent in the last year, while the take-up of commercial space by tenants had also increased by 58 per cent.
Insolvencies in the second quarter of 2015 have also risen eight per cent compared to the same period in 2014, when just 319 property investment companies became insolvent.