Tag Archives: Property

February 10, 2012

2012 starts well….I think

By Tim GARRATT

I got my monthly snapshot of the market from Property Data which showed a reasonable start for January. Not as good as 2011 as you will see, but better than 2010 and 2009.

Although yields (the return on capital) have come in very slightly they are still pretty flat. The fall has been by around 0.25% against the last three, six and twelve month figures. It’s a step in the right direction. The lower the yield the higher the price paid. The last month showed an average of 6.09% – previously we have been stuck at around 6.35%

The market is still being skewed by a couple of deals. A Tesco portfolio was sold last month to Trinity College Cambridge for £450m and a portfolio of 14 warehouses were sold for £314m. These two deals account for nearly 40% of all transactions.

So, as previously it is difficult to read the tea leaves at the moment. It seems busier, we are seeing more enquiries – and there seems to be a little bit more of a positive feel about the place. Deals are still hard to do, due diligence is the new delay. Dotting of i’s and crossing the t’s takes time – especially when you do it two or three times! But there are some deals going on. Bank borrowing remains difficult.

It may be early days, but it would be nice to think that there was something of a revival going on. We certainly need some good news – the back end of 2008 seems a long time ago. Thats when the crunch hit. We had hoped that it might be short recession, but alas that wasn’t to be. The new world is here – maybe we are just getting acclimatised?

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January 27, 2012

2011 – a miserable year for property…

By Tim GARRATT

I guess we knew what the headlines were going to be – and they haven’t disappointed…even if they are disappointing!

One trillion pounds - piled up next to an arctic....

In the commercial market in 2011 the value of UK commercial property investment transactions in Q4 2011 was £8.69 billion, down 25% on the same period for 2010. We were hit hard by the lack of liquidity in the market and by the Euro-Crisis.

UK house sales fell last year to 869,000, one of the lowest totals on record, HM Revenue & Customs has said. House price growth was just 1% – which in the circumstances was probably fairly good!

This seems to have been a long depression – the back end of 2008 was when we saw the writing on the wall – that is nearly 3.5 years ago. I don’t think we ever anticipated the market to flat-line for so long.

This week the UK reached £1tn (£1,000,000,000,000) in debt. To understand what one trillion looks like – go and have a look at your doormat – 1 Trillion of them would cover the whole of England, Scotland, Wales and Northern Ireland. Alternatively if you had spent £1m every day since Jesus was born, you would still have some change!

The really worrying thing is that there is little sign of a change in the short term. However, in the medium term I am involved in a number of major projects which could come to fruition in 2013-15. They have a long lead in, but I take some comfort in the fact that people are considering them. Of course this Parliament must be dissolved by May 2015, it is unlikely that the current incumbents will want to go to the Country with the current state of play.

Further I suspect that there will be some monies available starting next year. We will have the Olympics out of the way – I doubt we will ever know how much that has cost us. The budget of £9.3bn is apparently robust, money we can ill afford in the current economic climate!

Perhaps it is better in the middle distance than we think? I hope so!

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January 18, 2012

The East Midlands Market 2007-2011

By Tim GARRATT

Although the Title looks like an obituary, it’s not! Today my firm launch our annual review of the property market across the East Midlands. Today we hit Nottingham, tomorrow is Derby’s turn then we turn our attention to Leicester. We expect to meet around 750 of the regions property folk over the next few days.

We are uniquely placed, having an office in each of the regions major Cities (are you still allowed to say ‘regions’ I wonder). We trade in and report on commercial property across the golden triangle that is centred on Nottingham, Derby & Leicester. It’s my day job.

For the 5 years we have been monitoring the markets – to see if we can spot trends…

Our general view was that 2011 started well but then slipped back during the summer months. It looked like the market was coming back, but the second half of the year was disappointing. We remain optimistic though for 2012 – interest rates are low and inflation looks like is it beginning to fall. We need confidence to come back. The Euro needs to stabilise.

The 2011 key messages from our three offices were…

Derby – a robust reaction to the Bombardier Thameslink fiasco was balanced by a successful £40m Regional Growth Fund bid. Office take up was at its lowest level for the last 5 years. Fortunately Hero TSC took 68,000 sq ft in the last few weeks of the year.

Leicester – keeps delivering positive take up figures across all sectors. The MIRA Technology Park being a notable addition. The Passiv Haus at Raynsway Properties Watermead development (I blogged about it here) was a high point. Office take up was at its highest for 5 years!In addition 2.2m sq ft of Industrial space was shifted – a 10 year high.

Nottingham – the office market take up was marginally ahead of the 10 year average for the third year running. It was down very slightly on last year, but 566,000 sq ft was let or sold. Industrial take up was slightly up on the 2010 figure – but lower than the 10 year average.

If you would like a copy of the report – let me know via the comments section – and leave me your email address, I’ll email you a copy in PDF format.

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January 17, 2012

2011 figures – the property market cries!

By Tim GARRATT

I have finally got my long awaited property statistics from PropertyData for 2011. They publish the ‘deals done’ from which we can glean a picture of the state of health of the market. This is a fairly narrow snap-shot – it is only the commercial sector – but then only income producing investment properties.

We can glean two things from the data – firstly the volume of trading, secondly the yields people are paying. Yields reflect the risk – the higher the yield the higher the risk. But the higher the yield, the lower the price paid.

The average yields on property are now firmly stuck – 6.27% for the last 12 months. Values are flat – the 3 month average was 6.69% and the 6 month 6.47%.

But the real starry is the dip from 2010 in terms of volumes. The graph shown demonstrates this all too well. We are £4bn down on the same 12 month period to December 2010. But, more tellingly we are are £14bn down form the peak of 2007.

I was surprised by the yield – which I think as an average shows a higher general level values than I had expected. But if you delve a little deeper, you see that nearly one third of transactions took place in the central London office market. That shows a huge skew in the figures!

Property looks to be a good bet on the basis of returns elsewhere, but the fundamental issue is that you can’t get bank borrowing easily. Income producing property might be showing a lack of growth in the current climate (rents are pretty static) and we keep seeing bad news about occupiers, denting confidence still further.

It might be some time before we see some shift in this situation?

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January 10, 2012

Retail – where next in 2012?

By Tim GARRATT

I have touched upon the state of retail on the High Street before – notably just before Christmas when Portas issued her queen of shopping report. The blog was here.

As the retailers start t announce their Christmas trading stories, it looks like we are going to see some big changes in the next 12 months,. Some of the retailers we have become used to seeing as part of the street scene may be on the move – in some cases it may already be too late.

We may have to come to terms with a different feel to where we shop. In the next 12 months we could see a number of big names depart – La Sensa, Thorntons, Blacks, HMV, Argos, Mothercare, New Look, Peacocks and Superdrug are all under the cosh. Some of these guys have big box shops – the departure of which will make our Cities seem different places. And not in a good way!

The general view seems to be that felt sales will be good. Of course the retailers are facing an attack from the internet. Sales in some online stores have seen big increases – John Lewis shifted £600m of stock – with a 27% increase on sale in December. Their Christmas trading statement is here.

It only seems like yesterday when I was involved in the letting to Waterstones on Bridlesmith Gate in Nottingham – that was in 1998 – six years before Amazon even existed. It was a fantastic concept based around ‘dwell time’ – in other words if you keep people in your store – they will spend money. 20 minutes was the tipping point. I still like the store – but guess that I buy four books on Amazon (three of those on Kindle!) for every one I buy in Waterstones.

At the same time though the major supermarkets just seem to be growing – they are bidding for land considerably in excess of where residential ever were – even at the peak of the market.

It will be an interesting 12 months – I wonder what Nottingham will look like this time next year?

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December 24, 2011

2011 – the property facts

By Tim GARRATT

As this year draws to a close I was interested to receive my little book of facts about the property market for the year ending 2010 (it takes some time to fully analyse the data). Published by a group of respected commentators it contains some interesting nuggets.

And the 2010 top ten for you pop pickers…

1. Te commercial property saw values increase in 2010 by 8% to £561bn. We don’t know about 2011 yet, but I guess it may have slipped back.
2. Residential out-weighs commercial property by a factor of seven – it’s estimated to be worth £4.135bn.
3. Retail is the largest commercial property sector – estimated to be worth £200bn. Offices are next at £170bn.
4. Out of town retail now accoutnts for 19% of value – overtaking in-town (13%)
5. Two-thirds of commercial property is rented.
6. Average lese lengths are now 5.3% (I think this is a widely misinterpreted figure!) – it is clear that it is falling (in 1999 it was 8.7 years).
7. Office rents fell in the UK in 2010. Except in London.
8. UK Institutions invested £75bn in commercial property – down 7% in 2010.
9. Commercial property was the best performing asset class – marginally ahead of equities.
10. Nearly 1m people are employed in commercial property activities.

I think there is some good news in here – although the data is old. Of course, the really interesting facts will be in a years time when we see whether there was a double dip in 2011.

I live in hope that the market picks up in 2012.

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December 9, 2011

Looks like a double dip to me?

By Tim GARRATT

It’s not great news at the moment in our little property world. Confidence is pretty much shot to pieces it seems. Last months data from the PropertyData has a fairly hard hitting graph…

Interestingly Nottingham features highly in the figures though. The sale of Broad Marsh Shopping Centre to CSC is included in the figures – two deals of £18.3m and £55m account (CSC had to buy two different interests) for just over 30% of all shopping centre transactions. There was also the sale of the Chapel Quarter scheme at the top of Maid Marian Way to a Kuwait based frond – £20m was splashed out in our fair city. And then Carluccio’s sold too – on Low Pavement for just over £1m. So perhaps it wasn’t all bad for Nottingham last month?

Average yields though are still drifting. The three month weighted averages are now 6.66%, against a six month figure of 6.5% and a 12 month figure of 6.26%. The higher the yield the lower the values – as the risk is priced according to market sentiment.

It is also interesting to note that these are transactions which have taken place in a sector – i.e. where property has been producing income. Nottingham now has an estimated 850,000 sq ft of vacant office space. This is marginally better than Leicester at 893,000 but not as bad as Derby (572,000). But this totals 2.3 million square feet in the East Midlands major towns. That’s a lot of space. In the last few weeks we have started to learn of some of the Public bodies looking to shake off some excess stock – so those figures are likely to increase?

I’m still searching for some good property news to tell you. But don’t hold your breath just yet! It will come…

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November 17, 2011

Crystal ball gazing – a dangerous sport!

By Tim GARRATT

I was asked an almost impossible question this week – where did I think the property market would be in 5 years time – 2016?

Why did I think it would be ‘almost’ impossible? Impossible period!

As a valuer I spend my life looking backwards – I rely on evidence of transactions that have happened. Property on the market with asking prices is just that – aspirational. But not ‘value’. Looking back 5 years we were in the heat of a boom – prices were sky-high. Since then, we have had a crash (40% reductions in same parts), a minor bounce back in 2010, a falling back in 2011 and a pretty rocky road at the moment.

So, like that awful interview question (‘where do you see yourself in 5 years time’?) this is an area where you have to tread carefully. You may want to say ‘in your chair dopey’, but there might be a more conservative answer – ‘probably having moved up a little bit, without having caused waves’.

But back to the issue – try some things we used to know – the market is cyclical, we are probably at a low ebb and the Government will want to get re-elected in 2013-ish (which might make them do something to intervene). But that was then and this is a strange market so I’m not sure.

I don’t think we will see ‘boom times’ again. Too many people have lost money – including the Banks.

A very wise old client of mine used to say that there was a natural level of property values – based around a 10% return on money. Good things were 8.5%, average were 10%. Poor were 12.5%. This was often shops, offices and industrial – in that order. Some values do buck this trend – but I have some sympathy with his view. We seem to come back to these numbers (and they were around these figures when I did my degree in the early 1980′s.)

So maybe that is it – the same as now, with luck, a bit better, with a storm, a bit worse.

In other words I haven’t got a clue and defy anyone to disagree!

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November 14, 2011

The property market – what is going on?

By Tim GARRATT

It is a question I get asked a lot. And the honest answer is that I don’t know. Three years ago when the world imploded we thought were in for a tough couple of years. I’m not sure much has changed in those three years. Worryingly, I can’t see much around me that makes me think it is going to change soon.

The Eurozone crisis is not helping, nor is the prospect of strike action in the UK by the Unison Union later this month. The overall feel good factor is quite the opposite?

The stark reality at the moment is that markets are driven by sentiment, rather than results. What happened before might not be an indication as to what might happen tomorrow. We have a new world order. Sentiment is at a low ebb. The mornings and nights are dark and in some way that’s a reflection of the market. A dark place.

And yet – here’s an odd thing – we aren’t on suicide watch. Actually I think we are as busy as we have ever been. One of my competitors asked a few people last week whether they had noticed a pick up after a ‘quiet summer’ He had. Actually, looking back, I have had a busy year – it never slowed down. We are still in business and we are still making a profit. We still keep 65 people in full time employment and we try to do our little bit in promoting stuff.

It is hard work, but I have clients who are very active in the market – there are good deals to be had in all of this uncertainty. I have sold some stuff too – into different markets from the ‘norm’.

So, when I started to pen this blog post a few days ago, I did think it was a bit gloomy out there. I am not saying that it is booming – but perhaps it is a little less bad than we thought! (That’s a sort of positive!)

Roll on summer….

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October 27, 2011

The market – catch 22

By Tim GARRATT

It doesn’t help a fragile market to have confidence wobbles. Talking a market down is easy – and worryingly, in my view, we have become so used to bad news that is almost habit forming? We have forgotten the good times!

Some of the work I do is valuing property assets. It is not always easy at the moment to pin down values – especially when the evidence we use is rather thin! Valuers are always looking backwards, we rely on deals done. The valuation methods don’t use predictions of where a market will be! That’s a sure fire way to get sued for professional negligence.

Back in 2008 we invoked a clause in our valuations which is lovingly know as Guidance Note 5 – Valuing Uncertainty. It effectively puts the recipient of a report on notice that the valuation provided has a bit of a warning flag attached. We may not have been able to be as certain as we would like – usually due to the lack of comparable evidence.

This clause was gradually dropped at the market returned to a more stable state – even if the number of transactions was reduced.

But last week we were alerted to the fact that some of the National firms were starting to use the clause again – predominantly where they were involved in International (notably European) work. I guess they can see some of their work being impacted by the current financial mess in Europe.

We haven’t invoked the clause yet, but is remains under review.

You can see that this would not be a great thing to happen. The market doesn’t need a knock at this time. But we may have no alternative if things don’t get better!

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