As enter the Christmas / New Year break and the end of 2009 are we entering the end of the recession or are we just at “the end of the beginning”? The indicators and anecdotal evidence remains mixed – one report points firmly in one direction whilst another report, likely issued on the very same day, might well point in the opposite direction. So at least maybe we are at or near a turning point or inflexion.
I hope that you find this highly personal digest of the week’s commercial property stories useful and you can form your own opinion as to how things look for 2010. Happy Christmas and New Year to all our readers!
First some Christmas cheer from ING Real Estate
Parts of Continental Europe are close behind the UK and some Asian countries that are poised to lead the way to recovery in commercial real estate, according to ING Real Estate Investment Management’s annual global research study. The study, which was presented to journalists in London this week, indicates that large flows of capital into commercial real estate globally, attracted by depressed pricing, are helping to stabilise major markets. Tim Bellman, global head of research and strategy at ING REIM said: ‘In the UK and in key markets in Asia, excluding Japan, the point of take-off seems to have been reached.’
IPD Reports large (percentage) improvement
UK commercial property values rose by the largest monthly figure in 15 years, according to November’s IPD UK Monthly Index. Capital growth was 2.4% last month, bringing the compounded growth since the market began ascending in August to 5.4%. Year-to-date capital growth is now -8.4%, while steady income returns leave the total return for the 11 months of 2009 at -1.4%. The dramatic reversal of fortunes (OK let’s not get carried away let’s remember it’s a percentage change from a very low base figure) in the UK commercial property markets has been predicated on softening rental pressure and returning yield compression.
Commercialisation of public sector
Moves to create multibillion-pound public sector outsourcing and property companies, which could eventually be floated, are being considered by Whitehall. Gerry Grimstone, the businessman charged by the Treasury with finding ways to raise cash from public sector assets, has launched a review to consider how the government could set up companies along the lines of Capita and Serco, which handle huge government information technology and service contracts. So far the work done under the government’s review of its asset portfolio has focused on existing businesses that could be sold, including the Tote, the Dartford Crossing and the High Speed 1 rail line. But Mr Grimstone, the chairman of Standard Life and Candover who was Margaret Thatcher’s privatisation guru, is looking to go further and group activities from across a range of departments, such as IT functions, data processing and operating centres, into commercial entities. He said there was no reason such activities had to be done in the “vertical silos” of individual departments, and pointed out that the likes of Capita and Serco had already capitalised by taking parts of business from across government and combining them into “horizontal” businesses. He denied it was “far-fetched” that such public sector businesses could eventually compete with the existing service companies.
DTZ sees a new “wall of money” looking for a home in UK real estate
£36bn of capital will be available to invest in UK real estate in 2010, double the amount spent in 2009, DTZ has said. In its “The great wall of money” report, DTZ Research said that domestic, US and German funds were likely to be chasing property in the UK next year. The report covers capital raising from a range of investor groups across the globe. Of the £36bn, £20bn is from UK domiciled funds, £10bn from US funds and £2bn from German open ended funds. Half of the money is from funds that are solely targeting the UK and the other half is from funds targeting the UK as a part of multi-country strategies.
New appointments to Infrastructure & Planning Commision
The government has appointed three more decision makers to the Infrastructure and Planning Commission (IPC). It has appointed Gideon Amos, Katherine Bryan and Emrys Parry as commissioners on major national infrastructure projects in order to help IPC “hit the ground running” when it opens for applications on 1 March next year. Amos is chief executive of the Town and County Planning Association and is a member of the Planning Sounding Board at the Department for Communities and Local Government. He is also a member of the Government’s 2016 Taskforce to achieve zero carbon homes. Bryan is currently a non-executive director of Defence Estates and has chaired various other committees including the Committee on Radioactive Waste Management. Parry is a solicitor at a private law practice and has headed up the Planning and Regeneration Division of Bond Pearce solicitors. He is a legal associate of the Royal Town Planning Institute and is past chairman and currently secretary of the Compulsory Purchase Association. The IPC, which was launched on 1 October, is expected to save up to £300m a year by speeding up the planning process for major infrastructure schemes.
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