Overseas Buyers Poised To Ignite UK Commercial Property Market

The U.K.'s commercial real estate sector could be gearing up for fierce competition from buyers as funds, expecting more distressed property to come to market in the next two years, plan to snap up prime properties in hope of a recovery.

The market offers the potential of lucrative returns for overseas investors, in particular.

"The U.K. is attractive to overseas equity as values have fallen 45% peak-to-trough" and sterling has lost ground this year against major currencies such as the U.S., the euro and the yen, said James Thornton, founder of Mayfair Capital Investment Management, adding that "it makes for a very liquid market."

Thornton said he saw U.S. and Japanese investors returning to the U.K. market, as well as German open-ended funds, which traditionally have been prominent U.K. real-estate buyers.

Washington Post

Battersea Power Station Plans to Be Londons Cultural Hub

Battersea Power Station in South West London stopped producing power in 1983 and has been lying virtually derelict for many years.

Now Irish-owned Treasury Holdings plans to reform the iconic site into a central hub for Londoners, creating thousands of jobs along the way.

The £5.5billion project is the largest Central London has ever seen and consists of 3,700 new homes, restaurants, a hotel and leisure and community facilities. Over 1million square foot of office and retail space will also dominate the historical site.

The developers also plan to restore the building’s landmark chimneys along with a zero-carbon power station.

And they hope the power station will have the ability to be a cultural icon for London in the same way that Sydney Opera House is for the Australian city.

Speaking about the plans Rob Tincknell, managing director of Treasury Holdings UK, said: “We are extremely confident that two years of detailed discussions mean that this masterplan represents the aspirations and concerns of all the stakeholders involved, not least the Battersea community.

Irish Post

RICS Report on UK Commercial Property Market

A survey of the UK commercial property market published last week by the Royal Institution of Chartered Surveyors showed the first rise in inquiries and lettings activity on the British commercial property market since the beginning of 2009. The survey also made it clear that the growth in market activity was led by London.

The number of RICS surveyors reporting an increase in inquiries changed from -3 in the 2nd quarter of 2009 to +11 in the 3rd quarter, while the number of surveyors reporting an increase in new lettings and sales grew to +8 in the 3rd quarter, up from -13 in the 2nd quarter. The survey revealed that tenant activity in London improved faster than in any other UK region as the sector of office rents has seen increased demand for the 2 consecutive quarters. Increased activity, according to the RICS survey, can also be seen in the southern England and the Midlands, where commercial property sector gained support from the weak pound.

In the opinion of RICS senior economist, Mr. Oliver Gilmartin, the results of the survey carried out by the organisation suggest that signs of economic recovery, seen all over the world in the past weeks, can now be found on the UK commercial property market, which is slowly but surely moving into the positive territory.
Mr. Gilmartin highlighted that the current improvements on the UK commercial property market led to an increase in consumer confidence in the past 3 months; he added that the length of lease declined over this period, meaning that firms now have a great opportunity to take up new agreements.

It has to be mentioned that the pick up on the UK commercial property market comes hand in hand with the recovery of the British residential property sector. However, industry experts take a cautious approach towards these improvements as their sustainability is still uncertain.

Candy Brothers Central London Residential Fund

The Candy brothers and Smith & Williamson to launch £100m Central London residential fund in order to take advantage of sharp falls in asset values.

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London Leads an Upturn in Letting Activity

At last the long-suffering investors in the British property sector have some good news, with a survey saying a majority of surveyors in the county are now reporting rising inquiries and lettings activity for the first time in more than two years.

In its report for the third quarter, the Royal Institute of Chartered Surveyors (RICS) said London was leading the commercial property recovery. The survey of RICS's members across Britain found the London commercial property market was leading the turnaround in tenant activity, with retail and office demand moving into expansionary territory at a faster pace than elsewhere.

The RICS senior economist, Oliver Gilmartin, said the results may provide the first signal that a strengthening in the global economy has filtered into multinational lettings activity, particularly for Central London offices, where the veil of pessimism towards the outlook for rents is slowly lifting.

''Industrial lettings demand is also gaining some support from the improved economic backdrop. The laggard remains the retail sector, where surveyors expect little improvement in tenant activity in the run up to the crucial Christmas trading period,'' Mr Gilmartin said.

''In the investment market, the reflationary climate coupled with a reduction in the pace of job shedding and a weaker pound is quite clearly stimulating a return of investor interest at the prime end of the commercial property market.''

He said the near-term indicators continued to point to an ongoing improvement in the fourth quarter. New inquiries to occupy business space turned positive for the first time since the downturn began and it is the first time in five years that inquires have risen in unison across all three sectors.

The survey showed that net balance, of demand and supply, currently stands at 11 per cent, up from a negative 2 per cent in the second quarter.

London is leading the rest of Britain, with inquiries for office space in the capital reaching the highest net balance since the third quarter of 2007.

The biggest rise in confidence has been in the office market followed by the industrial sector, the survey showed.

Carolyn Cummins

London Retail Sales Rise

Central London's like-for-like retail sales rose 7.5% in September from a year earlier, the British Retail Consortium said Monday. This compares with a 0.2% fall in sales seen a year ago. The BRC said drier and mild weather encouraged more people to come out and shop.

Commenting on the results, Stephen Robertson, Director General of the BRC said," This is dramatically different from the previous month's figure. It's the strongest London sales growth recorded since August 2008". However, Robertson pointed out that the data must be treated with caution, as September's figures are compared to weak performance last year, when the sales were hit by the global financial crisis.

During the month, food sales held up, though the growth was dampened by the lower food inflation, the BRC noted. At the same time, clothing and footwear as also furniture and homeware sales picked up due to a rise in consumer confidence and the housing market.

"These latest figures for London follow the trend for the rest of the UK but, like the national picture, weak comparatives and mixed performances make it too early to draw conclusions on the strength of consumer spending in the capital." Helen Dickinson, Head of Retail of KPMG said.

Stephenson noted that the results could offer a glimpse of the optimism in the run up to Christmas. "But consumer confidence is volatile and could easily slip back," he added.
Global Finance News

Overseas Investors Continue To Favour London’s Commercial Property Market

Investment activity in London’s commercial property market has risen again for a second consecutive quarter. Figures for Q3 2009 show that £1.602 bn was invested in central London’s main West End and City & Docklands markets, an increase of over 12% on Q2’s total of £1.432 bn and a 29% rise on the same quarter last year. It is the first time the capital has delivered two quarters of consecutive growth since Q2 2007.

The dominant buyers continue to be overseas investors attracted by the weak pound and the very attractive returns achievable resulting from London’s relatively rapid price correction compared to other markets across the world.

Transaction volumes in West End up 24% on previous quarter
The West End again showed the biggest increase in activity with £909m invested; an increase of 24% on Q2’s total of £732m and up 32% on Q3 last year. There was no sign of the 'traditional' summer break with vendors keen to take advantage of the purchaser demand which has been building up throughout 2009.

In excess of 70% of all transactions were by non-UK buyers with London staying firmly on top of many international investors’ shopping lists. Reasons for this trend include the continuing weakness of the pound and the fact that the London/UK market has corrected more quickly than other global markets providing investors with relatively attractive returns.
IMMONEWS

London Commercial Property Up

London commercial property values improved for a second straight month in September, rising 1.1 per cent on average for the largest increase in more than three years, adding momentum to a revival in the hard-hit UK real estate market, data showed on Wednesday.

Property values had registered a 0.2 per cent rise in August, the first increase in 26 months, which ended a 44 per cent plunge in the Investment Property Databank's (IPD) benchmark index.

The data, used as the basis for UK's property derivatives market, also showed rents, for office, retail and industrial properties fell by 0.64 per cent on average last month, after easing to a 0.48 per cent fall in August.
REUTERS

London West End Office Space Rents Higher Than Europe

London remains the most expensive European city in which to rent prime office, distribution and shopping centre space.

Despite a steep fall in prime property values, London’s West End remains the most expensive location to rent space in Europe.

Office space in London’s West End is now on average £65 per square foot in rent, higher than Paris’ rent charges of £60 per square foot and Moscow’s £56 per square foot.

Due to significant distress in financial markets, prime office space in the City has fallen to below West End rents to an average rate of £42.5, but this is still above Milan, Geneva, Rome, Frankfurt and Dublin.

City rents are at their lowest level for more than 20 years, while West End rents are at a 13-year low.

Prime UK office locations have dropped by 40 per cent on average since the property peak in 2007.

And in the last six months prime European office rents have declined on average by 12 per cent.

But recent commercial property deals, including Nomura and Catlin’s deals for office space, and reports of firms now battling for prime location in the City, have led experts to believe rents will begin to bounce back in 2010.

Banks More Willing to Lend for Commercial Property Deals

Banks are increasingly willing to led to those looking to complete commercial property deals, according to a new study.

Research has found that the number of top lenders that would provide finance has almost doubled in recent months, with 23 willing to lend in excess of £20 million over the second half of 2009.

However it should be noted that the number of active lenders is still pretty low, despite the rise, and they are still willing to lend much less than they were two or three years ago and the money that they are willing to lend comes at a higher price and on less generous terms.

Investment in Central London Commercial Property Rising

Signs that banks are beginning to open their doors to commercial property companies and a rise in demand from foreign investors for offices in Central London have prompted claims that the next bubble in values may already be forming.

Figures released yesterday show that investment in commercial property in London grew in the three months to the end of September for the second consecutive quarter — the first time that the capital has recorded two consecutive quarters of investment growth since mid-2007.

Investment in Central London, which includes the West End, the City and Docklands, rose more than 12 per cent in the third quarter to £1.6 billion.The dominant buyers continue to be overseas investors attracted by the weak pound and the very attractive returns achievable resulting from London’s relatively rapid price correction compared with other markets across the world.

The market received a boost from the Libyan Investment Authority, which paid £155 million for Portman House in the West End in July, and the recent sale of a 50 per cent stake in British Land’s Broadgate development to Blackstone, the American private equity group, for just over £1 billion.
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Timesonline

West End Business Rates Increase

West End businesses today said they feared for their futures as rates soar by up to 100 per cent.

They criticised the Government for a massive business rates increase which they said penalised them for being in central London.

Hundreds of shops, hotels, offices and restaurants will be affected by the rise, which will come into force next spring.

The rates, which are taken by councils but set by the Government, will double in some areas because they were revalued during the property boom. Part of the rise will fund Crossrail.

Rates for an average office in Westminster borough will rise by 38 per cent, but in Knightsbridge they will increase by 110 per cent to more than £100,000, the council said. They will go up 72 per cent for an office in Marylebone Road.

London is taking the brunt of the increase to subsidise other parts of the country, where rates will go down. Business owners called the rise “crazy”, saying it would stop them recovering from the recession. Some said they could be forced to fold.

Colin Stanbridge, chief executive of the London Chamber of Commerce and Industry, said: “This will place a real burden on businesses as they try to emerge from the worst recession in a generation. London already pays far more than its fair share of business rates so we are asking the Government to rethink its proposals.”

London Evening Standard

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Foriegn Retailers Save West End

The proportion of vacant shops in London's West End has declined during the economic crisis. The vacancy rate in the area, which receives about 200 million visitors a year, fell from 5.9 percent to 4.6 percent between January 2007 and July 2009, in contrast to the rest of the country where it jumped from 7.3 percent to 13.8 percent in the period. The resilience in the West End has been credited to the entrance of foreign retailers eager to sell their goods to overseas tourists. The research also showed that empty premises in the West End remain unoccupied for a shorter period than in the rest of the capital and Britain.

Middle Eastern Investors in London's West End

Middle Eastern investors have become the main foreign buyers in the UK's commercial real estate market, according to property agents.

While lower oil prices have damped their overall appetite for overseas transactions, Arab investors in the first half of 2009 refocused on London, their traditional overseas base, snapping up prime assets at prices that had reached 25-year lows.

43 per cent of overseas investments in UK hotel, office and retail property deals came from Middle Eastern investors, lured back to the market as yields doubled with the falling asset values of properties in the City and West End.

London Remains One of the Most Important Commercial Centres

Despite the best efforts of the recession to undermine the UK's economy, London still remains one of the most important centres for business and commerce on the planet. Prior to the economic downturn, London commercial property came at a price that was well beyond the reach of most small businesses. However, since the recession really took hold, freeholders and landlords have been forced to drop their prices, creating a window of opportunity for small businesses and private investors.

There can be little doubt that having a business with a London address carries more weight than anywhere else in the country. London offers everything a business could want: it is served by 5 major international airports that offer convenience for business overseas and hosting meetings with foreign companies. London's underground network provides a means of transportation that can take you from one end of the capital to the other in the space of little more than one hour and the motorways and road systems that feed London provide accessible routes for haulage vehicles and nearby means to access any location in the country.

Buying commercial property in London can be a lucrative investment. With prices at an all-time low, many small businesses are taking advantage of the opportunity to expand by buying commercial property in London at prices that are now much more within their price range. For the private investor, the opportunities are even broader; buying at the low prices thrown up by the recession can only lead to an increase in capital as the property market recovers its footing. As the price of property will inevitably increase, so too will rents charged for commercial property in London. As both landlords and freeholders, investors can make a profit on either front; there will never be a shortage of tenants in London and a property bought at today's prices should in time see substantial gains.

Anyone considering buying commercial property in London would be best advised to seek the services of a commercial property estate or acquisition agent. Their local knowledge and overall knowledge of the London property market will allow them to identify emerging hotspots ripe for investment. In addition, an independent commercial property estate or acquisition agent will be able to use their negotiating skills to secure the favourable terms possible on your behalf. With the London Olympics arriving in 2012, certain areas of the capital will experience regeneration and investment quicker than others; a good commercial property estate agent will be able to advise you as to which areas offer the most potential profitably to you and your investment ; there is much more to the capital than the West End and the City.

Property advisors, have predicted that London office space will start to increase in value at some point during the course of 2010. As a result, landlords will be able to increase the rents they charge and we should see a kick-start to London's economy finally. Before that happens, investors would be prudent to investigate the current prices of commercial property to rent or to buy in London and see just how profitable the opportunities are that the recession has inadvertently provided.
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