LONDON - Bloomberg
Trading in U.K. commercial real estate derivatives fell by half in the second quarter after the property market's biggest slump since the 1990s sparked a record number of trades in the preceding three months.
The 22 investment banks licensed to use IPD indexes to create the securities traded derivatives with a face value of 1.63 billion pounds ($3.2 billion), London-based Investment Property Databank Ltd. said Friday in an e-mailed statement. There were 3.44 billion pounds of trades in the first quarter.
U.K. commercial building values began falling a year ago after 11 years of gains, encouraging property companies and other investors to use the instruments to hedge investments which can take months to sell. Offices, shops and warehouses lost 4 percent of their value in the second quarter, an index published by IPD showed Thursday.
IPD's indexes also acted as a peg for 260 million pounds of second-quarter real estate derivatives trades in markets including Australia, Canada, France, Germany, Italy, Japan, Spain and Switzerland.
A total of 18.8 billion pounds of commercial derivatives contracts have been executed globally since 2004.
A derivative is a financial obligation whose value depends on interest rates, the outcome of specific events, or the price of underlying assets such as real estate, debt, equities, commodities and currencies.