Tag Archives: Values

Apr 24 2012

The market has slowed (stopped)?

The market at the moment is quite odd. There seems to be a bit of activity; we are seeing a bit of movement in property. I have got some bids in on property I’m selling and I have just bought some property too. Getting deals over the line is pretty tough – due diligence is painful at best. Deals fall out of bed easily – often at the eleventh hour and often without warning.

But the latest figures suggest all is not well in the property world.

It seems that the total value of UK commercial property investment transactions in the first quarter of the year was £7.53 billion, down 27% on the same period for 2011. We had hoped that 2012 would be the start of a recovery.

Central London office investment broke £4 billion for the quarter – the highest figure since the financial crisis

Overseas investors spent £3 billion during the first quarter – representing 42% of all purchases. Interesting that the cash coming in is not from ‘here’.

Retail investment fell from £3.15 billion in the first quarter of 2011 to £1.42 billion in the latest quarter.

So statistically we are in a bad place. The real issue here is liquidity. There is little money around, Bank borrowing is not exactly easy. Loan To Value rates are poor – meaning you have to have quite a lot of equity to put into a deal.

My real issue is that I can’t see what is changing in the short term? The Banks have a negative attitude to any sort of risk at the moment – property is seen as risky. This doesn’t look to be changing anytime soon?

Apr 3 2012

Property – a spring in the step?

In the last month or so I have been a little more heartened by the market. It feels different. By different, I mean ‘better’. Frankly it couldn’t get a lot worse!

I am not convinced that we have yet seen the market return to boom times, or that the published statistics show through just yet. But there seems to be more activity, more confidence and a little less doom and gloom.

Perhaps it was the spring warmth and daffodils.

I was in London at a National Auction – where the room was full and bidding was brisk. I thought some of the prices paid were above where I had expected. There was little signs of the jitters. Admittedly some of the lots were in London – where there does seem to be something of a resilience. But some were spread around the UK too.

In one case a 2,203-sq ft listed building in Leighton Buzzard let to Lloyds Bank sold for £780,000 at a yield of 4.7%. It was a pretty building but this sort of yield makes for an expensive purchase.

Then at the weekend we were helping a friend look for a house – and it seemed that, firstly, the number available is low, but secondly, where they are priced rich, they are selling quickly.

These are just two examples I have witnessed and hardly a reflection on the whole market. Indeed my firm are thinking that 2012 will be a tough year. Deals are taking a long time to secure. The due diligence now is like walking in treacle. It’s not easy getting a deal ‘over the line’.

Fingers crossed, the market may be on the up. We certainly could do with some good news in the property industry – after nearly 4 years of sustained flat-lining!

Feb 13 2012

The Nottingham Office Review 2011

It’s obviously that time of year when we look back at the previous year – in an effort to make sense of what is going on in our market.

The assembled participants - and me enjoying myself despite the fact is was before 8am...

The Nottingham Office Review is a collaborative document which is drawn together by CoStar – but takes information from all of the key Nottingham Agents. they then try to analyse what has happened in the local market.

This years review can be found here.

It was my colleague Craig Straw who presented the findings on behalf of the Forum assembled. I don’t need to replicate the report – but it is fair to say that Nottingham held its own last year. The number of deals were reduced but what did happen made for an ‘ok’ year. We have certainly done better than Birmingham which has a near 20% vacancy rate – against our approximate 13%

We have nearly 2.3m sq ft of offices in the pipeline – which should hold us in good place for future occupiers.

But in the meantime what I did like were the reasons to look at the City – I am happy to cut and paste…

* 8th largest recruitment catchment in the UK
* Over 1.1 million people in the journey to work area
* Over 98% of the UK market within a 4 hour drive of the city
* Access to 55,000 students studying at Nottingham’s two universities
*Home to global businesses including Capital One, Experian, Alliance Boots, Speedo and E.On
* A leading Science City in the UK with research excellence in BioSciences, Low Carbon Technologies and Digital Media
* Cutting edge global digital infrastructure
* Award winning integrated transport network with two new tram lines under construction
* Top 6 retail destination
* The UK’s most energy self-sufficient city

Feb 10 2012

2012 starts well….I think

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?

Jan 27 2012

2011 – a miserable year for property…

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!

Jan 17 2012

2011 figures – the property market cries!

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?

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 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!