Tuesday, Jun 05, 2007
The doom of UK commercial property
Times: Can rising rents offer cushion from fears of crash?
You know bad news is coming when CEOs disagree with the market. "Stephen Hester, British Land’s chief executive, said: “We are looking cheap as an investment. The market is saying that there will be a fall. I do not agree with that.” Better being frank: “There can only be one ending and we’ll look back and talk about how obvious the signs were.” (Gerald Ronson, founder and head of Heron International)
Posted by confused76 @ 04:34 PM (107 views) Add Comment
7 Comments
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3. Ash4781 said...
I don't know about your town centre but in my locla one there are so many empty retail units its untrue (probably soon to become luxury flats). Oh and didn't Brown change the council tax relief for empty properties ?
Rent deflation more like!
4. uncle chris said...
As I've said before, rents have a natural ceiling which is strongly related to average wages, unlike the prices BTL landlords have recently been willing to pay, which is based purely on how much banks have been willing to lend them. Unfortunately for landlords, as true inflation bites (CPI is purely fictional these days) that ceiling will fall, and not rise as Stephen Hester hopes. BTL is stuffed well and truly, and the only ones who may survive are those that get out early.
5. Scott said...
uncle chris is right. If you cannot borrow enough to buy, the banks can always lend you more. But if you don't have enough to rent, there is no helping hand so it makes it more real. As for the landlords, just like the tech companies during the burst dotcom bubble, only the largest will survive.
Did you know before the dotcom bubble burst there were over 1,000 seach engines. Today I could name 5; Google, Yahoo, MSN, ask.com, altavista. Get the picture.
6. paul said...
Actually, this article is looking at commercial rents, which are governed by quite different market forces to residential rents.
However, the principles aren't dissimilar because both have suffered from a divergence from market fundamentals.
I reiterate, rents will not rise, because the market rate is a race for the bottom, and void periods instantly wipe out any rental gains from raising rents. Wishful thinking on the part of over-stretched landlords.
7. enuii said...
I work on a science park stuffed full of new-build offices, many stand empty for years before finding a tenant and the landlord is merrily building more, larger glass 'n' steel edifices to add to his rental portfolio. To my mind there are only so many people this country can employ in offices and like the property market the number of office workers must surely be at saturation point unless some grand bureaucratic scheme is in the offing whereby the government will pay for more people to throw even more paper at each other.