Less than one in 20 UK commercial property experts believe a fast-paced recovery in asset values will continue in 2010, while tenant demand and rental growth remain under pressure, a survey out on Monday showed.
Benchmark data in the latest Expert Panel survey, by online real estate portal Reita, shows average commercial property values have gained about 9 percent since July, although this has been driven by prime quality, well-located buildings.
Some investors fear values of secondary property in less popular areas may take up to 18 months to catch up with soaring prices in locations such as Mayfair and the City financial district, both in London, the survey showed.
Experts also worry measures taken by government to curb Britain's rising national debt could exacerbate this 'two-tone' rebound by compressing tenant demand and rental growth.
"The only economic certainty is that public spending will be severely cut by the next government and that people will have a lot less money to spend as a result," Peter Cosmetatos, director of Reita, said.
"This will undoubtedly have an impact on business and on the take-up of commercial space. With that in mind we should tread very carefully when making any predictions over long term market recovery this year," he said.
Wednesday, 27 January 2010
Tuesday, 26 January 2010
Commercial Property "Trumps" Residential Property
At this time of year, residential real estate investors, struck by the most dismal returns of 2009, are looking for alternative ways to generate wealth
What if we could diversify and still hold on to good ol` bricks and mortar?
We can through commercial property and the returns could be very lucrative indeed. The "Trumps" of the world have been doing it for years. Yet this is an area where many fear to tread. To determine if this fear is justified, let`s uncover the myths.
Myth 1: Commercial property is more risky
False. Commercial tenants view their rentals as operating and tax deductible expenses of the business. They are willing (perhaps not ecstatic though!) to pay as long as they are deriving an income from the premises. Certainly there is a chance their business will fail but there is more of an incentive to pay when compared to residential tenants who often resent their exploitative, greedy landlord. Furthermore, there is less government protection for non paying commercial tenants than for residential tenants.
Myth 2: It is more difficult to secure a commercial tenant
True. If a house has not been rented, it is because the rent is too high. Drop the price (sometimes drastically) and you will probably find a tenant. On the other hand, when a commercial property is empty it may not be because of the rental level but because the property is only suited to certain activities, one may not be able to mould any operation into the premises.
Myth 3: You need greater capital to invest in commercial real estate.
True and False. Banks are willing to lend a large proportion of a residential purchase price. At boom times 110%. Banks are far more conservative with commercial real estate and generally do not lend more than 50-70% of the value of the property.
However banks are not concerned with PRICE, but rather VALUE (determined in commercial property largely by the rental income). One can purchase a vacant property (rental of 0) and source a tenant, increasing the rent and hence the value, leading to a loan which may exceed 100% of the price.
Myth 4: Commercial property requires more management
False. Commercial leases may run for up to 20 years or longer. Tenants will be establishing a business from the premises and require continuity. They have custom designed the premises to suit their needs and their clients and staff become familiar with the premises, hence their desire to stay.
Residential tenants on the other hand often look for the shortest possible leases and even when they do sign a long term lease, will often use a longer story to get out of it!
Myth 5: Commercial property requires more maintenance
False. Commercial tenants earn their income from the premises. They are much more likely to do small maintenance jobs themselves than wait for the landlord as they need things fixed immediately. In addition, they will always be looking for ways to make the property more desirable in order to please clients and generate a greater income.
Residential tenants often call the landlord with the most trivial problems. They will seldom, if ever, invest their own money in making the property more desirable because they view it as someone else`s investment.
Realestateweb
What if we could diversify and still hold on to good ol` bricks and mortar?
We can through commercial property and the returns could be very lucrative indeed. The "Trumps" of the world have been doing it for years. Yet this is an area where many fear to tread. To determine if this fear is justified, let`s uncover the myths.
Myth 1: Commercial property is more risky
False. Commercial tenants view their rentals as operating and tax deductible expenses of the business. They are willing (perhaps not ecstatic though!) to pay as long as they are deriving an income from the premises. Certainly there is a chance their business will fail but there is more of an incentive to pay when compared to residential tenants who often resent their exploitative, greedy landlord. Furthermore, there is less government protection for non paying commercial tenants than for residential tenants.
Myth 2: It is more difficult to secure a commercial tenant
True. If a house has not been rented, it is because the rent is too high. Drop the price (sometimes drastically) and you will probably find a tenant. On the other hand, when a commercial property is empty it may not be because of the rental level but because the property is only suited to certain activities, one may not be able to mould any operation into the premises.
Myth 3: You need greater capital to invest in commercial real estate.
True and False. Banks are willing to lend a large proportion of a residential purchase price. At boom times 110%. Banks are far more conservative with commercial real estate and generally do not lend more than 50-70% of the value of the property.
However banks are not concerned with PRICE, but rather VALUE (determined in commercial property largely by the rental income). One can purchase a vacant property (rental of 0) and source a tenant, increasing the rent and hence the value, leading to a loan which may exceed 100% of the price.
Myth 4: Commercial property requires more management
False. Commercial leases may run for up to 20 years or longer. Tenants will be establishing a business from the premises and require continuity. They have custom designed the premises to suit their needs and their clients and staff become familiar with the premises, hence their desire to stay.
Residential tenants on the other hand often look for the shortest possible leases and even when they do sign a long term lease, will often use a longer story to get out of it!
Myth 5: Commercial property requires more maintenance
False. Commercial tenants earn their income from the premises. They are much more likely to do small maintenance jobs themselves than wait for the landlord as they need things fixed immediately. In addition, they will always be looking for ways to make the property more desirable in order to please clients and generate a greater income.
Residential tenants often call the landlord with the most trivial problems. They will seldom, if ever, invest their own money in making the property more desirable because they view it as someone else`s investment.
Realestateweb
Monday, 25 January 2010
RICS UK Commercial Property Survey
The amount of office space available to tenants in London declined for the first time in two years as the London economy started to lead the country out of recession according to the RICS' UK Commercial Property Survey.
Demand for business property increased in the fourth quarter of 2009 with office space and industrial property proving particularly popular but demand for retail space continued to decline. Fourteen per cent more chartered surveyors reported a rise in tenant demand up from 8% in the previous quarter. This is the second successive rise in tenant demand and the first time that there has been an upward trend since early 2007.
Eight per cent more chartered surveyors reported a fall in available floorspace in London down from a positive balance of 37%. This is the first time the net balance for office availability has turned negative for two years with central London witnessing the strongest upturn in activity. As a consequence, the lack of available space has had an impact on office rents in the capital which stabilised for the first time in two years.
These positive improvements have increased the expectations of chartered surveyors for future lettings with optimism rising across the office and industrial sectors. The biggest rise in confidence has been in the office market followed by the industrial sector although expectations towards retail lettings remains flat. Investment transactions rose across all sectors with 35% of chartered surveyors reporting a rise, up from 7% in the third quarter.
Commenting, Oliver Gilmartin, RICS senior economist said: "Surveyors have turned mildly optimistic on the outlook for rents in London for the first time in over two years outside the retail sector as the capital continues to drive the recovery. Whilst retail property has seen the strongest rebound since August it is lagging the occupier market turnaround. However, the news that lease lengths are no longer declining in the capital and incentives are being scaled back for offices and industrials will come as some comfort for investors whom have driven a sharp rebound in pricing since the Autumn.
"To be sustained, the rapid rise in capital values in the London market needs to be supported by further rental increases particularly as prime yields are rapidly approaching financing costs. The reluctance of banks to lend to developers has clearly added some support to rents in London as available space is no longer rising outside the retail sector. Significantly, development starts continue to fall back."
Demand for business property increased in the fourth quarter of 2009 with office space and industrial property proving particularly popular but demand for retail space continued to decline. Fourteen per cent more chartered surveyors reported a rise in tenant demand up from 8% in the previous quarter. This is the second successive rise in tenant demand and the first time that there has been an upward trend since early 2007.
Eight per cent more chartered surveyors reported a fall in available floorspace in London down from a positive balance of 37%. This is the first time the net balance for office availability has turned negative for two years with central London witnessing the strongest upturn in activity. As a consequence, the lack of available space has had an impact on office rents in the capital which stabilised for the first time in two years.
These positive improvements have increased the expectations of chartered surveyors for future lettings with optimism rising across the office and industrial sectors. The biggest rise in confidence has been in the office market followed by the industrial sector although expectations towards retail lettings remains flat. Investment transactions rose across all sectors with 35% of chartered surveyors reporting a rise, up from 7% in the third quarter.
Commenting, Oliver Gilmartin, RICS senior economist said: "Surveyors have turned mildly optimistic on the outlook for rents in London for the first time in over two years outside the retail sector as the capital continues to drive the recovery. Whilst retail property has seen the strongest rebound since August it is lagging the occupier market turnaround. However, the news that lease lengths are no longer declining in the capital and incentives are being scaled back for offices and industrials will come as some comfort for investors whom have driven a sharp rebound in pricing since the Autumn.
"To be sustained, the rapid rise in capital values in the London market needs to be supported by further rental increases particularly as prime yields are rapidly approaching financing costs. The reluctance of banks to lend to developers has clearly added some support to rents in London as available space is no longer rising outside the retail sector. Significantly, development starts continue to fall back."
Sunday, 24 January 2010
West End Purple Flag Award
London's Leicester Square and Covent Garden have been named safe and attractive places to visit in a national scheme.The areas in London's West End have been awarded Purple Flags by the Association of Town Centre Management.
The scheme assesses each area's crime rates, hygiene standards and range of visitor attractions.Westminster City councillor Daniel Astaire described the award as an "incredible achievement".
The Purple Flag scheme aims to recognise high city standards in the same way that Blue Flags indicate good beaches and Green Flags recognise good parks.
The Home Office-backed scheme also hopes to encourage more city centre visitors between 1700 and 0600 GMT.
Extra police and floodlights were installed in the West End in December last year, along with a giant screen displaying travel information.
Last month the number of serious violent offences in the West End fell to seven, compared to 11 in December 2008.
The scheme assesses each area's crime rates, hygiene standards and range of visitor attractions.Westminster City councillor Daniel Astaire described the award as an "incredible achievement".
The Purple Flag scheme aims to recognise high city standards in the same way that Blue Flags indicate good beaches and Green Flags recognise good parks.
The Home Office-backed scheme also hopes to encourage more city centre visitors between 1700 and 0600 GMT.
Extra police and floodlights were installed in the West End in December last year, along with a giant screen displaying travel information.
Last month the number of serious violent offences in the West End fell to seven, compared to 11 in December 2008.
Friday, 22 January 2010
Great Portland Revives Developments on Rental Growth Prospects
Great Portland Estates Plc, the property developer focused on London’s West End district, revived its building plans on prospects of a recovery in rents.
The company will start an office project on Regent Street, refurbish a building on Oxford Street and convert a nearby office into an apartment block, Great Portland said today in a statement. It also reported a gain in property values and a lower vacancy rate.
Great Portland halted most of its projects in 2008 as the global financial crisis triggered a two-year slump in property values and rents. The company today predicted a recovery in rents in the second half because of a shortage of new space in the West End, the world’s most expensive office location. About 80 percent of Great Portland’s properties are located in the district, which has the city’s highest concentration of shops, theaters and restaurants.
“Supply is tight,” Chief Executive Officer Toby Courtauld said in a telephone interview. Marcol House on Regent Street “should be the first West End development to complete in 2012 and is going to be a real rarity.”
Bloomburg
The company will start an office project on Regent Street, refurbish a building on Oxford Street and convert a nearby office into an apartment block, Great Portland said today in a statement. It also reported a gain in property values and a lower vacancy rate.
Great Portland halted most of its projects in 2008 as the global financial crisis triggered a two-year slump in property values and rents. The company today predicted a recovery in rents in the second half because of a shortage of new space in the West End, the world’s most expensive office location. About 80 percent of Great Portland’s properties are located in the district, which has the city’s highest concentration of shops, theaters and restaurants.
“Supply is tight,” Chief Executive Officer Toby Courtauld said in a telephone interview. Marcol House on Regent Street “should be the first West End development to complete in 2012 and is going to be a real rarity.”
Bloomburg
London Commercial Property Top Investment
London surged as the top destination for commercial real estate investment, beating out Washington D.C. and leaving New York in the dust, according to a recent survey by the Association of Foreign Investors in Real Estate (AFIRE).
London's score was 31 points higher than second-place Washington and 40 points ahead of third-place New York. Last year, London was in second place, four points behind Washington and only two ahead of New York.
Investors believe that commercial real estate prices in London already have bottomed out. However, prices in the U.S. have not because of differences in accounting practices.
"London currently offers investors the advantage of a "re-priced" market," James Fetgatter, AFIRE chief executive, said. "The re-pricing began sooner than it did in other cities."
The survey of the association's nearly 200 members was conducted in the fourth quarter 2009. Survey respondents own more than $842 billion of real estate globally including $304 billion in the U.S.
The United States remained the country selected as the "most stable and secure real estate investment environment," although only 44 percent of the respondents said so. It was the first time the United State fell below 50 percent in the survey. That's down from 53 percent in 2008 and 57 percent in 2007.Germany was second with 21 percent.
London's score was 31 points higher than second-place Washington and 40 points ahead of third-place New York. Last year, London was in second place, four points behind Washington and only two ahead of New York.
Investors believe that commercial real estate prices in London already have bottomed out. However, prices in the U.S. have not because of differences in accounting practices.
"London currently offers investors the advantage of a "re-priced" market," James Fetgatter, AFIRE chief executive, said. "The re-pricing began sooner than it did in other cities."
The survey of the association's nearly 200 members was conducted in the fourth quarter 2009. Survey respondents own more than $842 billion of real estate globally including $304 billion in the U.S.
The United States remained the country selected as the "most stable and secure real estate investment environment," although only 44 percent of the respondents said so. It was the first time the United State fell below 50 percent in the survey. That's down from 53 percent in 2008 and 57 percent in 2007.Germany was second with 21 percent.
Tuesday, 19 January 2010
London Financial Centre Set For 100,000 New Jobs Boost
Tosca, one of the City's best-known hedge funds, expects London to thrive as a financial centre over the next decade. In contrast to doom-laden forecasts about the City's imminent demise, Tosca chief economist Savvas Savouri believes it will become the natural Western hub for emerging market growth. According to Savouri, the capital will attract at least 100,000 new financial services jobs over the next ten years. With demand for London property already outstripping the supply on the market this news can only lead to property price rises over the decade.
Monday, 18 January 2010
Canary Wharf SIte Sold On at Loss
Property developer Bernard McNamara and investors assembled by stockbroker Davy have taken a €45 million hit on a site in London.
McNamara’s Grattan Property bought the 0.87-acre site in Canary Wharf in 2007 for €65 million with backing from Davy investors, and planned to develop a €500 million, 45storey building called 1 Park Place.Full planning permission was granted for the development,which would have been London’s second-tallest building.
However, the site was acquired last Friday for just £17.5 million (€19.8 million) by the Canary Wharf Group. The site adjoins land already owned by the group and was ‘‘a significant opportunity for future development’’, with planning consent for almost 1.5 million square feet of development, it said.
The sale of Park Place appears to bring to an end the relationship between McNamara and Davy, who also joined forces on the €412 million buyout of the Irish Glass Bottle site in Dublin.The Davy investors last week successfully sued McNamara for €62.5 million, prompting the developer to declare he was ‘‘broke’’.
McNamara’s Grattan Property bought the 0.87-acre site in Canary Wharf in 2007 for €65 million with backing from Davy investors, and planned to develop a €500 million, 45storey building called 1 Park Place.Full planning permission was granted for the development,which would have been London’s second-tallest building.
However, the site was acquired last Friday for just £17.5 million (€19.8 million) by the Canary Wharf Group. The site adjoins land already owned by the group and was ‘‘a significant opportunity for future development’’, with planning consent for almost 1.5 million square feet of development, it said.
The sale of Park Place appears to bring to an end the relationship between McNamara and Davy, who also joined forces on the €412 million buyout of the Irish Glass Bottle site in Dublin.The Davy investors last week successfully sued McNamara for €62.5 million, prompting the developer to declare he was ‘‘broke’’.
Best Property Investments for 2010
Which investments are likely to perform best in 2010, and why? Marino Valensise, global chief investment officer at Baring Asset Management gives his view to Asian Investor;
We are very much sponsoring the emerging-market equity trade, based on demographics. In terms of demographics, when comparing the East and the West, the difference has never been so dramatic. The East/West split is particularly significant, because there is a significant correlation between demographics and economic growth.We take an interest in agriculture, commodities and stocks as a result of these demographic fundamentals.
GDP per capita in emerging markets is still low in absolute terms, but is growing fast. As it grows, the dietary requirements of the population change - people tend to eat more and better and consume more proteins. This has always been the case; take Japan in the post-World War II years, South Korea in the industrialisation years [of 1962-1989] and the US 120-130 years ago.
And in order to eat more and better, you need more corn, wheat and soybeans, and more equipment to work the fields. You can play [this theme] through commodities and through stocks related to the food chain -- from fertiliser makers to food distributors to equipment manufacturers.
Another attract feature is that this theme has not got more expensive compared to a year ago. In fact, the price of agricultural commodities via an ETF is actually cheaper than a year ago. They have not rallied with stocks; this is the cheapest commodity theme you can play. Emerging markets will drive this demand.
Barings' agricultural fund holds around 60-70 stocks linked to that theme, emerging, non-emerging, small and large caps. We have stocks listed in emerging markets, but we also have stocks listed in markets like the US -- such as [agricultural biotechnology company] Monsanto and [equipment maker] John Deer. These are multinationals that also sell into emerging markets. We also hold around four or five fertiliser makers globally, including [Canadian company] Potash Corp and Taiwan Fertiliser.
Another area that may be interesting going forward is property in developed markets, since governments are giving out money at low rates. Commercial property prices in the UK are down 30-40% from their peak in June 2007.Annual rental yield is now 6-7% for UK commercial property. If you can borrow at 1% and get that yield, that's a decent return, especially on something that's already dropped that much [meaning prices are likely to rise again]. And in the UK, commercial property has gone down more than residential prices, although on the flip side, it is more closely linked to the economy, making it more dangerous.
Central banks are encouraging this carry trade, so property post-crash is something that is very attractive. Also, if you buy property instead of putting money into deposits, you also get some inflation protection.The commercial property theme in the UK has been out of favour in the past 12-24 months, but is now gaining interest.
Asian Investor
We are very much sponsoring the emerging-market equity trade, based on demographics. In terms of demographics, when comparing the East and the West, the difference has never been so dramatic. The East/West split is particularly significant, because there is a significant correlation between demographics and economic growth.We take an interest in agriculture, commodities and stocks as a result of these demographic fundamentals.
GDP per capita in emerging markets is still low in absolute terms, but is growing fast. As it grows, the dietary requirements of the population change - people tend to eat more and better and consume more proteins. This has always been the case; take Japan in the post-World War II years, South Korea in the industrialisation years [of 1962-1989] and the US 120-130 years ago.
And in order to eat more and better, you need more corn, wheat and soybeans, and more equipment to work the fields. You can play [this theme] through commodities and through stocks related to the food chain -- from fertiliser makers to food distributors to equipment manufacturers.
Another attract feature is that this theme has not got more expensive compared to a year ago. In fact, the price of agricultural commodities via an ETF is actually cheaper than a year ago. They have not rallied with stocks; this is the cheapest commodity theme you can play. Emerging markets will drive this demand.
Barings' agricultural fund holds around 60-70 stocks linked to that theme, emerging, non-emerging, small and large caps. We have stocks listed in emerging markets, but we also have stocks listed in markets like the US -- such as [agricultural biotechnology company] Monsanto and [equipment maker] John Deer. These are multinationals that also sell into emerging markets. We also hold around four or five fertiliser makers globally, including [Canadian company] Potash Corp and Taiwan Fertiliser.
Another area that may be interesting going forward is property in developed markets, since governments are giving out money at low rates. Commercial property prices in the UK are down 30-40% from their peak in June 2007.Annual rental yield is now 6-7% for UK commercial property. If you can borrow at 1% and get that yield, that's a decent return, especially on something that's already dropped that much [meaning prices are likely to rise again]. And in the UK, commercial property has gone down more than residential prices, although on the flip side, it is more closely linked to the economy, making it more dangerous.
Central banks are encouraging this carry trade, so property post-crash is something that is very attractive. Also, if you buy property instead of putting money into deposits, you also get some inflation protection.The commercial property theme in the UK has been out of favour in the past 12-24 months, but is now gaining interest.
Asian Investor
Sunday, 17 January 2010
Year of Reckoning for Commercial-Property Lenders?
The Wall Street Journal reports that opportunistic investors are hoping that 2010 will be the year that European lenders begin biting the bullet and accepting losses to get distressed commercial real-estate assets off their books.
So far, banks have mostly been turning a blind eye to technical breaches of loans. Rather than foreclosing and being forced to take write-downs, they have held nonperforming commercial-property loans on their balance sheets, extending deadlines, refinancing debt or even selling them off to subsidiaries.
So far, banks have mostly been turning a blind eye to technical breaches of loans. Rather than foreclosing and being forced to take write-downs, they have held nonperforming commercial-property loans on their balance sheets, extending deadlines, refinancing debt or even selling them off to subsidiaries.
Friday, 15 January 2010
RBS to Put Top London Hotel Grosvenor House up for Sale
The Telegraph reports that the Grosvenor House hotel, one of London's most famous hotels and venue for some of the UK's biggest award ceremonies, is set to be put up for sale.
The five-star hotel is owned by state-backed Royal Bank of Scotland , making it one of the most luxurious assets controlled by the taxpayer, and its sale is expected to raise between £600m and £700m.
RBS is preparing for the disposal after a sharp rebound in commercial property values since August, with cash-rich domestic and overseas investors attracted by historically low pricing.
The five-star hotel is owned by state-backed Royal Bank of Scotland , making it one of the most luxurious assets controlled by the taxpayer, and its sale is expected to raise between £600m and £700m.
RBS is preparing for the disposal after a sharp rebound in commercial property values since August, with cash-rich domestic and overseas investors attracted by historically low pricing.
Wednesday, 13 January 2010
Secret Syndicates Buying Commercial Property
Private banks are putting together secret syndicates of their rich clients to buy commercial property off-market.
HSBC Private Bank said that there had been a rise in demand from its international clients for exposure to big-ticket commercial property investments in capital cities, after evidence that the market had bottomed out.The bank said that it had taken the “unusual step” of setting up a syndicate in response, a move that will add to an already competitive field of investors seeking to capitalise on what they see as an historically attractive opportunity.
HSBC, which has reported a doubling in demand for property investments in the past 18 months, last week completed the £141.7 million purchase of an office and restaurant building in Washington on behalf of 17 anonymous investors.
The bank said that it planned to set up similar syndicates to meet demand for property in New York, Boston and London. The buyers remain anonymous, even to each other, investing for three to five years, generating income from rent and hoping to sell the property for a higher sum than its original purchase price.
Timesonline
HSBC Private Bank said that there had been a rise in demand from its international clients for exposure to big-ticket commercial property investments in capital cities, after evidence that the market had bottomed out.The bank said that it had taken the “unusual step” of setting up a syndicate in response, a move that will add to an already competitive field of investors seeking to capitalise on what they see as an historically attractive opportunity.
HSBC, which has reported a doubling in demand for property investments in the past 18 months, last week completed the £141.7 million purchase of an office and restaurant building in Washington on behalf of 17 anonymous investors.
The bank said that it planned to set up similar syndicates to meet demand for property in New York, Boston and London. The buyers remain anonymous, even to each other, investing for three to five years, generating income from rent and hoping to sell the property for a higher sum than its original purchase price.
Timesonline
Tuesday, 12 January 2010
London Commercial Property Market Dominated by Overseas Investors
Since property owners have had to slash prices for commercial property in the UK, there has been an avalanche of interest from overseas investors. With prices falling by 20% in the downturn, there is no surprise that cash rich investors from abroad are casting a keen eye over the UK commercial property market. The question is whether these bargain hungry investors will continue to take an interest after prices recover and the recession passes?
The answer to this question is almost unequivocally “Yes”. Part of the reason is that the overseas interested parties seem to be in a much stronger financial position than many of their UK rivals. London is the epicenter for overseas investors in commercial property, with CBRE revealing that “73 per cent of commercial property purchases by value in central London last year were made by foreign investors.” In total they poured £5 billion in the UK market in 2009, saving it from an even greater collapse. In the past decade, overseas investors have only really accounted for around half of all transactions.
Among the more eye-catching transactions were the National Pension Service of Korea's £772.5m acquisition of the HSBC tower in Canary Wharf and sale of the US embassy to a subsidiary of Qatar's sovereign wealth fund. Although the value of that deal has not been disclosed, it is known that the fund, Qatari Diar, has spent more than £3bn on UK property. It is aiming to spend about £2bn more on primarily British office space.
The Qataris, who also took a 24 per cent stake in Canary Wharf co-owner Songbird Estates last year, are not alone. Having got a taste for high-quality commercial real estate in the City, West End and Canary Wharf during the rough times, overseas investors are set to continue to pounce on London buildings in 2010.
The answer to this question is almost unequivocally “Yes”. Part of the reason is that the overseas interested parties seem to be in a much stronger financial position than many of their UK rivals. London is the epicenter for overseas investors in commercial property, with CBRE revealing that “73 per cent of commercial property purchases by value in central London last year were made by foreign investors.” In total they poured £5 billion in the UK market in 2009, saving it from an even greater collapse. In the past decade, overseas investors have only really accounted for around half of all transactions.
Among the more eye-catching transactions were the National Pension Service of Korea's £772.5m acquisition of the HSBC tower in Canary Wharf and sale of the US embassy to a subsidiary of Qatar's sovereign wealth fund. Although the value of that deal has not been disclosed, it is known that the fund, Qatari Diar, has spent more than £3bn on UK property. It is aiming to spend about £2bn more on primarily British office space.
The Qataris, who also took a 24 per cent stake in Canary Wharf co-owner Songbird Estates last year, are not alone. Having got a taste for high-quality commercial real estate in the City, West End and Canary Wharf during the rough times, overseas investors are set to continue to pounce on London buildings in 2010.
Friday, 8 January 2010
Telereal Trillium Test Investors Appetites
Property investment firm Telereal Trillium has put up for sale 55 UK commercial properties, principally let to the Royal Bank of Scotland (RBS.L), to test investor appetite for larger portfolios, it said on Wednesday.
Telereal, owned by the Pears family, has appointed CB Richard Ellis (CBG.N) to advise on the sale, with a guiding price of 475 million pounds ($758 million) for the properties, including the historic London offices of the Queen's bank, Coutts.
"Following the purchase of this portfolio two years ago we have had regular enquiries from many parties interested in acquiring single assets," Telereal group property director Graeme Hunter said in a statement.
"Since the summer however, the level of interest in a larger portfolio transaction has increased dramatically and as such we see the time as being right to test the market's appetite for this excellent product," Hunter said.
British commercial property values in November posted the largest monthly increase in 15 years, up 2.4 percent. The market has rebounded since mid-2009, following a two-year downturn that wiped 44 percent off commercial property values. [ID:nLDE5BD1XN]
JPMorgan property analyst Harm Meijer said it was interesting to see larger portfolios being brought to market because of firmer prices.
"This is in line with our view that there remains a considerable overhang of property that may come to market as investment appetite strengthens, and in our view will limit the bounce in prices," he said.
The company said flagship assets in the portfolio, mainly leased by RBS until 2037 with annual retail prices index (RPI) rental increases, include the London headquarters of RBS-owned private banks Coutts on The Strand, Drummonds on Trafalgar Square, and Child and Co on Fleet Street.
More than 45 percent of the portfolio's income is derived from assets in London, the company said.
Telereal, owned by the Pears family, has appointed CB Richard Ellis (CBG.N) to advise on the sale, with a guiding price of 475 million pounds ($758 million) for the properties, including the historic London offices of the Queen's bank, Coutts.
"Following the purchase of this portfolio two years ago we have had regular enquiries from many parties interested in acquiring single assets," Telereal group property director Graeme Hunter said in a statement.
"Since the summer however, the level of interest in a larger portfolio transaction has increased dramatically and as such we see the time as being right to test the market's appetite for this excellent product," Hunter said.
British commercial property values in November posted the largest monthly increase in 15 years, up 2.4 percent. The market has rebounded since mid-2009, following a two-year downturn that wiped 44 percent off commercial property values. [ID:nLDE5BD1XN]
JPMorgan property analyst Harm Meijer said it was interesting to see larger portfolios being brought to market because of firmer prices.
"This is in line with our view that there remains a considerable overhang of property that may come to market as investment appetite strengthens, and in our view will limit the bounce in prices," he said.
The company said flagship assets in the portfolio, mainly leased by RBS until 2037 with annual retail prices index (RPI) rental increases, include the London headquarters of RBS-owned private banks Coutts on The Strand, Drummonds on Trafalgar Square, and Child and Co on Fleet Street.
More than 45 percent of the portfolio's income is derived from assets in London, the company said.
Thursday, 7 January 2010
Londons New Commercial Skyline
The Emerging Commercial Towers of London
The Shard
The skyscraper at London Bridge is so called because it will resemble a shard of glass when its 306m (1,004ft) tower is finally finished next year. Of all the ambitious projects launched during the boom before the commercial property sector imploded in 2008, the Shard appears to be one of the few to have survived unscathed.
The lower floors of the structure are already appearing above London Bridge Station. The Shard was intended to be Europe's tallest building – before plans for two skyscrapers in Moscow were unveiled. It is owned by a collection of Qatari investors and designed by the Italian architect, Renzo Piano. The Shard, which has replaced Southwark Towers, a 100m tower built in 1976, will become the new home of Transport for London.
Walkie-talkie
One of the most innovative, or oddest, designs for a new London skyscraper (depending on who you speak to) is Land Securities' planned "Walkie Talkie", a £200m project that won planning consent in 2006. The approval was granted only after the designs were altered, following protests that the 200m (656ft) tall structure would detract from views of St Paul's Cathedral. Land Securities said yesterday that there was no definite date when construction work might begin.
Cheese Grater
Like the "Walkie Talkie", there are few signs that British Land's "Cheese Grater" is likely to be built soon. Initially, the group planned to complete the tower by 2011 but it announced in August 2008 that plans for the building at 122 Leadenhall Street in the City of London had been put on hold. A source close the company confirmed that British Land had no immediate plans to resurrect the project, saying the commercial property sector in London was still far too precarious.
Battersea Power Station
One of the most famous buildings in London, and used by the Bank of England during the Second World War to burn £120m in banknotes to prevent forgery, the plant on the south side of the Thames has seen better days. Several developers have failed to do anything with the site since it ceased producing electricity in 1983. Treasury Holdings wants to transform the area with flats and a shopping centre; the chief problem is transport. Positive noises have been made but, with expected cuts in public spending, the Mayor's office said yesterday that any transport link would have to be privately funded.
Heron Tower
When completed in 2011, the tower will stand 242m (794ft) tall and spend a brief spell as London's tallest building, until the The Shard is completed in 2012. Despite the Bishopsgate project not yet being finished, it is already the tallest building in the City, having overtaken Tower42 in early 2009. The joint venture between Heron International and two other independent investors is a fully-funded, fixed-price development that, unlike most, remains on budget and on schedule for completion.
Heron Quays West
One of the most remarkable changes to the London skyline since the Luftwaffe arrived in 1940 was the redevelopment of the Docklands into a financial district to rival the predominance of the City. Since building started in the 1980s, a number of leading financial institutions have moved to the area. Canary Wharf Group continues to develop the site and has been given planning permission for a new, two-tower building known as Heron Quays West, which will stand 156m (512ft) tall when completed. However, little progress has been made, and a spokesman for the group confirmed yesterday that there were no immediate plans to start building on the site. The group also admitted there had as yet been no serious expressions of interest from potential tenants.
Helter Skelter
When completed in 2013, the Helter Skelter will be one of the tallest building in the City, at 288m (945ft). Architects had planned for it to top 307m (1,007ft) but concerns from the Civil Aviation Authority resulted in the height being chopped. Originally developed by Union Investment, the property was bought by Arab Investments during the early stages of construction. The new owners altered the design and building work began afresh in 2009.
Riverside South
One Docklands skyscraper that is more likely to be built soon is Riverside South. The land was sold to investment bank JP Morgan for £237m in 2008. Plans exist for the bank to use the 214m (702ft) tower as its European headquarters from 2013. The office will then become the tallest building in Docklands, beating One Canada Square by one metre (although One Canada Square will appear taller on the London skyline). The problem is JP Morgan's failure to commit. A source at the bank said last night that a decision on its new headquarters would be taken later this year, based on economics and London's position as a financial centre. He rejected the idea that the bank was annoyed by higher taxes on City firms.
The Shard
The skyscraper at London Bridge is so called because it will resemble a shard of glass when its 306m (1,004ft) tower is finally finished next year. Of all the ambitious projects launched during the boom before the commercial property sector imploded in 2008, the Shard appears to be one of the few to have survived unscathed.
The lower floors of the structure are already appearing above London Bridge Station. The Shard was intended to be Europe's tallest building – before plans for two skyscrapers in Moscow were unveiled. It is owned by a collection of Qatari investors and designed by the Italian architect, Renzo Piano. The Shard, which has replaced Southwark Towers, a 100m tower built in 1976, will become the new home of Transport for London.
Walkie-talkie
One of the most innovative, or oddest, designs for a new London skyscraper (depending on who you speak to) is Land Securities' planned "Walkie Talkie", a £200m project that won planning consent in 2006. The approval was granted only after the designs were altered, following protests that the 200m (656ft) tall structure would detract from views of St Paul's Cathedral. Land Securities said yesterday that there was no definite date when construction work might begin.
Cheese Grater
Like the "Walkie Talkie", there are few signs that British Land's "Cheese Grater" is likely to be built soon. Initially, the group planned to complete the tower by 2011 but it announced in August 2008 that plans for the building at 122 Leadenhall Street in the City of London had been put on hold. A source close the company confirmed that British Land had no immediate plans to resurrect the project, saying the commercial property sector in London was still far too precarious.
Battersea Power Station
One of the most famous buildings in London, and used by the Bank of England during the Second World War to burn £120m in banknotes to prevent forgery, the plant on the south side of the Thames has seen better days. Several developers have failed to do anything with the site since it ceased producing electricity in 1983. Treasury Holdings wants to transform the area with flats and a shopping centre; the chief problem is transport. Positive noises have been made but, with expected cuts in public spending, the Mayor's office said yesterday that any transport link would have to be privately funded.
Heron Tower
When completed in 2011, the tower will stand 242m (794ft) tall and spend a brief spell as London's tallest building, until the The Shard is completed in 2012. Despite the Bishopsgate project not yet being finished, it is already the tallest building in the City, having overtaken Tower42 in early 2009. The joint venture between Heron International and two other independent investors is a fully-funded, fixed-price development that, unlike most, remains on budget and on schedule for completion.
Heron Quays West
One of the most remarkable changes to the London skyline since the Luftwaffe arrived in 1940 was the redevelopment of the Docklands into a financial district to rival the predominance of the City. Since building started in the 1980s, a number of leading financial institutions have moved to the area. Canary Wharf Group continues to develop the site and has been given planning permission for a new, two-tower building known as Heron Quays West, which will stand 156m (512ft) tall when completed. However, little progress has been made, and a spokesman for the group confirmed yesterday that there were no immediate plans to start building on the site. The group also admitted there had as yet been no serious expressions of interest from potential tenants.
Helter Skelter
When completed in 2013, the Helter Skelter will be one of the tallest building in the City, at 288m (945ft). Architects had planned for it to top 307m (1,007ft) but concerns from the Civil Aviation Authority resulted in the height being chopped. Originally developed by Union Investment, the property was bought by Arab Investments during the early stages of construction. The new owners altered the design and building work began afresh in 2009.
Riverside South
One Docklands skyscraper that is more likely to be built soon is Riverside South. The land was sold to investment bank JP Morgan for £237m in 2008. Plans exist for the bank to use the 214m (702ft) tower as its European headquarters from 2013. The office will then become the tallest building in Docklands, beating One Canada Square by one metre (although One Canada Square will appear taller on the London skyline). The problem is JP Morgan's failure to commit. A source at the bank said last night that a decision on its new headquarters would be taken later this year, based on economics and London's position as a financial centre. He rejected the idea that the bank was annoyed by higher taxes on City firms.
Wednesday, 6 January 2010
Art Taking Over Central London Space
A London-based group calling itself The Oubliette is advocating turning unused commercial and industrial property over to arts groups as a way of advancing the arts economy.
The group, which grabbed headlines in 2009 for its controversial practice of moving into unoccupied space without the permission of the owners, is now planning a program in which it woos property owners to lend their unused space to artists.
"There's an abundance of empty property in London right now, when the demand for creative space is at an all-time high," Dan Simon, founder of The Oubliette, said in an interview with CBC's Q cultural affairs show on Tuesday.
"Now what we're doing is we're occupying locations in central London to raise awareness of our art-house model and it turned out to be a fantastic success."
Simon says The Oubliette, a French term meaning dungeon, is a "middleman" between emerging artists and the mainstream economy.His goal is to get unused commercial units or factories and turn them over to independent artists rent-free as a platform to create new work.
The group got a lot of publicity last year when it was evicted from a building in the Waterloo district of London. Simon regards that experiment as a success
The group, which grabbed headlines in 2009 for its controversial practice of moving into unoccupied space without the permission of the owners, is now planning a program in which it woos property owners to lend their unused space to artists.
"There's an abundance of empty property in London right now, when the demand for creative space is at an all-time high," Dan Simon, founder of The Oubliette, said in an interview with CBC's Q cultural affairs show on Tuesday.
"Now what we're doing is we're occupying locations in central London to raise awareness of our art-house model and it turned out to be a fantastic success."
Simon says The Oubliette, a French term meaning dungeon, is a "middleman" between emerging artists and the mainstream economy.His goal is to get unused commercial units or factories and turn them over to independent artists rent-free as a platform to create new work.
The group got a lot of publicity last year when it was evicted from a building in the Waterloo district of London. Simon regards that experiment as a success
Tuesday, 5 January 2010
What 2010 Holds For The Commercial Property Market
Whilst 2009 packed enough volatility and uncertainty into the commercial property market to last us at least another ten years, pundits are already queuing up to try and pinpoint how the peaks and troughs of the next 12 months are going to shape up.
At the end of last year, commercial property values were undergoing a surprising recovery, increasing month on month and even growing by a substantial 2.4% in November according to the IPD index, which made it the steepest monthly rise in 15 years.
This followed a period of crashing values, as commercial property prices plummeted by a record 40% since their peak in the summer of 2007.
However, property experts have been lodging their cautiously optimistic outlooks for 2010, with many predicting a year of positive returns from property, although it is not widely believed that prices will continue to climb at the same pace.
Property consultancy CB Richard Ellis told the Financial Times newspaper that there would be a “steady rise” in property investment activity, with a particular focus on prime property.
London is also predicted to profit from the property recovery, with intrepid investors sticking to central London offices and good quality retail parks, whilst the outlook for poorer-quality stock remains tentative.
Although encouraging signs are there, forecasters have expressed caution in leaping back into the market as it remains to be seen how the crisis in Dubai, quantitative easing, unemployment and higher taxes will affect the recovering market.
Saturday, 2 January 2010
Central London Office Space Rents to Rise
The cost of renting an office in Central London is set to rise this year as the effect of a two-year development drought finally bites.
Rents for prime space have stabilised at £42.50 per sq ft in the City and £75 per sq ft in the West End. Cushman & Wakefield, the property consultancy, said there had been a flurry of lettings in the past three months that had soaked up much of the existing floorspace, leading to greater upward pressure on rents. The 2.6 million sq ft of space that was let in the last quarter of 2009 was the highest quarterly figure for more than two years — since the third quarter of 2007.
In contrast, the 5 million sq ft of floorspace under construction in London is 42 per cent lower than 12 months ago. Cushman said that pressure on rents had “narrowed the opportunity” for tenants to secure new premises at historically low rent levels and to negotiate incentive packages with landlords.
Most property commentators agree that rents will rise again over the next 12 months, after falling from a peak of £65 a sq ft in the City and £130 a sq ft in the West End in December 2007.
Subscribe to:
Posts (Atom)
