Tag Archives: Property

Dec 24 2011

2011 – the property facts

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.

Dec 9 2011

Looks like a double dip to me?

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…

Nov 17 2011

Crystal ball gazing – a dangerous sport!

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!

Nov 14 2011

The property market – what is going on?

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….

Oct 27 2011

The market – catch 22

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!

Sep 26 2011

Market threats or opportunities?

It’s fair to say that this is a pretty weak market. Although the Government seem to have taken some tough measures to cut Public Sector Borrowing, we don’t seem to be dragging ourselves out of recession.

The optimism of 2010 has gently slipped away. We all though that the market would be back in mid 2011, that has been and gone. And it’s not back.

I can’t see much improvement until 2012 now. The major economies of the world seem to be struggling to get things going again. There is very little optimism around. We rarely hear great news stories in the property industry.

So we all need to be gloomy?

Well, not quite. In any market place there are opportunities when the market is weak. In fact their are opportunities because the market is weak.

Offering great service stands out in a poor market. But we also need to think strategically at these times. It is possible to find win:win situations in deals – particularly in commercial let property. As an example we are seeing more leases being negotiated early – well before lease end. Tenants can drive good deals, but landlords can also protect their interests too, by securing an income stream.

I think we are going to be in a period of uncertainty for some time to come.

But the market has always been cyclical – and it always will be. It is only a matter of time before it comes back…

In the meantime – we have to make the most of it.

Sep 15 2011

Empty Rates – no real winners?

I blogged a couple of weeks ago about the removal of Empty Rate relief for commercial property. It has been a bit of a disaster for some of our clients.

But the property industry is a pretty resilient place and much smarter, it seems than the Government. Although it is not always possible to avoid paying the Rates, the position can often be ‘mitigated’. And the industry seems to have out-foxed the Government. In the latest figures from the Office for National Statistics (ONS) the Government has failed to save the millions of pounds it had hoped by scrapping the Empty Rates relief. In fact they awarded more in relief in 2010 than they did in the preceding two years.

This is despite the fact that there are now 269,000 vacant commercial properties in the UK – amounting to 16% of the total stock.

So how do you avoid the Rates? Well, it’s easy really! We find people who want temporary occupation of property and are prepared to do deals. They move in for 6 weeks and then move to another property. The 6 months relief starts again after 6 weeks occupation…

It doesn’t work for everyone, but we have a number of properties where we can do this. And it seems that it is working!

I am sure that the loophole will be closed when these clever folks running the country hear the penny drop. But bear in mind that the Tories in opposition said they would scrap the charge, only then to change it a few weeks before the election.

Yes another example of an ill-thought through piece of legislation?

Aug 12 2011

The long hot property summer?

It’s time for my monthly look at the property market. As expected it’s not pretty.

The market remains flat – we have weak demand and so prices are flat. Average yields (from PropertyData) over the last year have remained almost unchanged.

Although these are very much average yields – they do provide an interesting overall commentary:

1 month – 6.42%
3 months – 6.19%
6 months – 6.24%
12 months – 6.18%

In fact you will see that in the last month the yield has worsened (a higher yield equals a lower capital value). Further the number of transactions – shown in the illustration are lower than the same period last year. It’s not getting much better?

There is very little confidence. The usual excuse that it is because everyone is on holiday has followed a long winter. I have no doubt Christmas will be starting soon?

In the last few weeks America has wobbled – suggesting it can’t pay the rent. I’m sure that these sort of headlines impact on how people feel…

Maybe we’ll see a return to great trading conditions in the Autumn? Then again….

Jul 27 2011

Who would be a shopkeeper?

It hasn’t been a great year for UK retailers. Failures this year include Focus DIY, Oddbins, Habitat UK, Moben Kitchens‘ owner Homeform, Jane Norman and TJ Hughes. Others, such as Mothercare , Thorntons , Carpetright and Comet , are closing outlets now…

Habitat RIP

The Local Data Company do frequent reviews of the state of the retail market – and the latest one has just been published. This is for the first half of 2011 and measures vacancy rates. It’s not pretty reading. The national average is 14.5% – which is pretty stable. But Nottinghamshire has taken a battering – and lies at 17.4%. Ouch.

We are seeing a shift in the type of people taking units. Supermarkets continue their inexorable move to global domination. Betting Shops are doing well too (!) as are ‘pound shops’ and Charity shops. These aren’t ‘real shops’ though? They are simply a reflection of a stopped economy – of a market where people have tightened their belts. They are not what we need in the long term.

The best shopping places in my view are where you have niche or specialist shops. Boutiques where they know their product. Not faceless conglomerates or recycled charity shops. Real shops – where you can find different things – not just the same old same old? The problem with the mass market is that we will all start to look like each other. There is little space for differentiation – it will become a pretty boring place when we are all wearing Tesco white tee shorts!

I’m not sure how we overcome this – it does point towards local independents coming back to life – they are currently on life-support and in some cases may need the plug pulling at the wall. But if we don’t get them back – and fill the little shops – we are in for a tough time for some time to come. Vacant shops don’t add much to a place – they can easily destroy it. Dead frontages hit adjacent shops hard.

Fingers crossed we can resuscitate the patient!

Jul 22 2011

Property – the rain continues

It’s been a pretty dismal summer? First it was too dry, now it seems to be very wet. Especially the weekends.

And hot on the heels of the ‘summer’ comes the release of the second quarter headline figures from PropertyData. Perhaps not surprisingly they say:

·The total value of UK commercial property investment transactions in Q2 2011 was £6.45 billion, down 29% on the same period for 2010
·UK institutional net investment fell to £194m for the last three months, against £916m in the first quarter.
·Banks sold over £1 billion of commercial property during the quarter
·Overseas investors were the largest purchaser of UK commercial property, spending £2.14 billion in Q2

Not great news then. But hardly surprising. This is not a market going anywhere in a hurry – as I noted from the data before it is ‘flat-lining’. The first statistic is the telling one – transactions are down by 29%. That shows that if you don’t need to sell at the moment – you shouldn’t. The Institutions are being cautious and the reality is that they drive the market. Banks are getting out of property too.

It is difficult to see and end to this bad news. The economy bumps along. Businesses predominantly remain sat on their hands. All too often I hear that the principal strategy for businesses is ‘survival’. No mention of growth or expansion then?

We are also in that horrible catch-22 situation where if a big requirement arrived on our doorstep from an external investor / occupier we don’t have the stock – and the reality is that the plans for the stock probably are 12 months away – if you pressed the ‘go’ button today.

We had hoped to see a market return in the latter part of this year – but I can’t help but wonder if we will, like last time, crawl out of recession over a 12/18 month period?

Roll on 2013….