21/07/16
The South East office market had been enjoying significant rental growth
in key markets and solid take-up and investment figures as well as robust
lending appetite. And then the EU Referendum vote arrived. All of which
contributed to a particularly insightful and entertaining debate at this year’s
RO Real Estate and Office Agents Society lunch, which took place with key
figures in the agency, investor, developer and lending communities the week
after the vote. CoStar News was in attendance.
The participants were: Richard Bourne, RO Real Estate, Ryan Dean, OAS
Chairman & Knight Frank, Richard MacDowel, Lloyds Bank, Aston Woodward,
Oxygen, James Silver, Landid, Rob Bray, Bray Fox Smith, Rory Carson, Oxford
Properties, Chris Lewis, Cushman & Wakefield, Phil Sturdy, Mayfair Capital,
Ed Smith, Strutt & Parker, Richard Talbot Williams, BNP Paribas Real Estate
The banking market appears to have initially been the most hit unless
you are a housebuilder. Richard what is the analysis from a Lloyds perspective?
Richard MacDowel – The announcement was clearly a
surprise, with the markets expecting Remain, but I understand there have been
contingency plans put in place with the Bank of England across the financial
sector to make sure liquidity remains strong. And I certainly feel that this is
very different to 2008, where real estate lending books across the UK currently
seem to be in robust shape, as per the latest de Montfort survey. I understand
at Lloyds we are well below 60% LTV across our book and we have been running
stress tests with our Regulator to ensure we are prepared for any potential
period of lower values. From our perspective, we have a strong balance sheet.
In terms of appetite for continuing to support and make real estate
loans to our customers, I have had no sense that it is anything other than
business as usual from a credit point of view. There will clearly be scrutiny
while revised valuation metrics are established, but we remain open for
business.
I think there is consensus that pricing will start to be impacted and
margins will go up as cost of capital increases with volatility and
uncertainty. But it’s too early to determine what the new normal is.
Richard Bourne – You are lending at margins over libor but libor is coming in and
looking at swap rates they are coming in too. Therefore won’t borrowing costs
remain relatively stable?
Phil Sturdy – I expect margins to increase by 50 to 75 bps while swaps have
come in by about 40 bps. The overall cost of debt is probably going to rise but
remain at historically cheap levels.
Richard MacDowel – My gut feeling is margins have
risen and will rise 25 to 50 bps and it probably won’t be as bad as 50 to 70
bps and, as you say, 10 year swap rates have dropped by 40 bps, so the
net difference I don’t think will be massive. Obviously if property values drop
then your overall ICR coverage should stay consistent. If you are lending at
60% loan to value against £10m and your ICR was 1.6 times and your value has
dropped to now £9m and you’re still at 60% and your cost of funds have only
gone up marginally, than actually your ICR should be in a better position. The
key of course is making sure your income covenant remains unchanged.
Phil Sturdy – Richard do you see banks being more cautious and bringing down
their LTVs and wanting better real estate and longer leases to lend against? To
be more discerning on what they lend against?
Richard MacDowel – Our credit policy has not changed, as we
remain a lender through the cycle and our policy is designed for such
eventualities. I suspect we will be cautious while the impact of Brexit remains
uncertain on occupier markets and values, but we remain very much open for
business, as I gather are a number of our competitors. We got challenges from
credit pre Brexit and we will get challenges from credit post Brexit.
Chris Lewis – So what happens if there is a reduced amount of activity in the
market and so less opportunities for you to lend against? Have you got pressure
to lend?
Richard MacDowel – I think our real estate lending
business is going to be under scrutiny along with those other sectors that
typically are first to suffer where there is a downturn, and we will continue
to justify the use of the bank’s balance sheet against lots of other demands of
capital in the bank. There is no pressure yet to lend and I believe liquidity
remains good, but we hope our customers see the merit of being with a strong
bank and we will look to support them in what they are doing. Whether there is
another push along the lines of the Funding for Lending Scheme, remains to be
seen. But I don’t see it at present.
Ryan Dean – We were gearing up to bring forward a few sales. Now they may
get held a little bit. How have values probably changed?
Chris Lewis – It is a bit early to say anything in terms of where values
are going but what we have seen is a few deals fall out of bed which possibly
were on the brink anyway, so it’s a good excuse to pull out of deals at this
stage. They have been under offer for a long time and are waiting to find a
reason not to do it.
Phil Sturdy – We pulled out of one deal with 25% vacancy. The deal was always
subject to Brexit and we didn’t even start due diligence. I think investors
will just move down the risk curve. There is natural nervousness right now for
riskier assets with short term income or vacancy. The longer leased assets look
relatively good value with gilt yields falling to sub 1%.
Richard Bourne – It is interesting. We have an institutional sale that has
exchanged subject to a Brexit clause. They had until 5pm last night to invoke
the break clause, 5pm has passed and they have asked for a completion statement
and the agreed price. Now that is a long-dated income. With RPI kickers and it
is a good quality covenant play - it is defensive stock. Property is a
long-term game and most investors are saying this will sort itself out over
5-10 years. So there is no real issue.
"I have not been party to their investment committee decision but
it must have been kicked around the table a few times and they have decided to
run with it. I agree we will see a flight to quality and a lot of funds and
institutions are likely to have to be seen to be not taking risk. But for us as
a South East focused private property company we are looking at where the
opportunities are. When this sale completes I am hoping to be sat on about £30m
of cash ready to invest and looking at where the opportunities lie. South East
offices over the years have done very well for us and I think there are a lot
of areas where the supply and demand balance is very good, I think there will
be some good opportunities going forward.
Chris Lewis – It does depend on where people’s attitudes to where the
occupational dynamics are. The aggression that we have seen on occupier growth
in appraisals is going to be pegged back a little bit. That said overseas
buyers with the currency plays that we are going to see are probably going to
lead to a more aggressive view on pricing so they may cancel each other out.
Ryan Dean – The funds will be more defensive, there will be a focus on
decent quality kit and income because if they have to sell that is the stuff
that goes first.
Chris Lewis – But who are the people who are going to sell? Maybe the retail
funds will come under a bit of pressure but they do have good cash buffers.
Phil Sturdy – A lot of the retail funds have quite significant 15 to 20% cash
buffers so they are much better placed than they were in the last downturn but
I guess they are expecting or are wary of redemptions.
Ryan Dean – The press have suggested some funds have taken a 5% discount
just to try to prevent redemptions.
Chris Lewis – Yes and that is the sort of thing that is understandable. They
are saying let us look six months down the line. We need to have the buffers in
place. Does that mean there are opportunities coming forward, probably not
because those retail funds from last time around will be selling assets of top
quality. They will not be looking to cut out the low quality because they will
see a big impact on value. They are going to say the reason why we bought top
quality assets in the first place is for these events where we have volatility
and values remain high.
Richard Bourne – But do you not think they will also see this on the secondary,
tertiary assets? They might think that the lot size is too small and the asset
is too management intensive, so let’s get it out the door and take the cash.
Rob Bray – Because there will be capex coming up. Some of the M&G stuff
that came along came out because it had capex in 12 months’ time.
Ryan Dean – If they need the money, they need the money. Trying to sell
something where you have vacancy coming up, is likely to be more difficult. But
if you need to put additional capex into a refurbishment then I can see those
decisions being more of a challenge.
Rob Bray - But there are other parties that pick up all of these
opportunities and the only way they make money is to buy low and sell high.
Phil Sturdy – I will be interested to see what the volumes are like because to
date they have been pretty depressed and investment agents thrive on deal
volume and I don’t see the volumes increasing significantly.
Chris Lewis – The UK investment volumes are forecast at noticeably lower than
2014, looking at down by 25%. It has been skewed by Green Park in the South
East. Q2 looks quite positive because of that but you have to take that into
consideration.
Ed Smith – The number of deals is down.
Chris Lewis – We are saying 25% down year on year and it could pan out a bit
more than that. If people have written off to Q3 then they may think let’s
write off the rest of the year and start again.
Richard Bourne – But how much of the year was annual market slowdown and how much
is Brexit?
Chris Lewis – The second half of last year was a marked slowdown on the first
half and we came into the beginning of this year and everyone was appraising it
as pretty fully priced. It was all about property fundamentals and then the
market occupational story. We are only buying decent centres with good growth
stories in the face of yield compression. That is where you can see where the
last six months has been going. Bolt on the Brexit and you can see that
it will stay off for at least a quarter, probably until the end of the year.
Ed Smith – Is that because last year was driven by the retail funds?
Chris Lewis – The first half of last year was retail funds. But overseas still
had about a third of the market.
Ryan Dean – But what they were trying to do was get their funds in decent
shape should something like this happen. Yes they did buy but they bought good
quality defensive assets which they paid a good price for.
Richard MacDowel – A fair amount of our overseas clients have
been relatively quiet in the build up to Brexit but actually in the last couple
of days we feel they will come back into the market because the exchange rate
has shifted. I think Q3/Q4 will see a lot more activity from overseas buyers
who were basically out of the market in Q2.
Richard Bourne – Private equity and property companies have been
building up funding to take advantage of the market so I think the investor
market is still there. The exchange rate is also making property look
relatively cheap for foreign investors now.
Chris Lewis – Yes they have their time in the sun to come because they
have always been up against the institutional market where they have been
struggling to win and now they have an opportunity where they say well actually
we are only up against ourselves now.
Ed Smith – Overseas investment is not common in the M25 though.
Aston Woodward – This morning I had a couple of calls from South African
investors, one a South African REIT and the other a South African family office
who have holdings here. Their concern is over what the impact will be to
existing holdings and what may happen to values and also if you have vacant
space what are the effects on companies who might potentially occupy that
space. We understand there will be redemptions in retail funds and we have been
talking to various fund managers. It will be interesting to see how it unravels
and from an overseas investment perspective it feels like an opportunity, the
question is at what point do you come in? There is currently a 5% discount and
this could be a 10% discount on some of the other retail funds and even greater
going forward
So I think in summary there is concern but without doubt there is a
sense of, is this an opportunity and should we be doing something about it and
if so when should we be doing something?
Richard MacDowel – So sterling has broadly come down 9%
against the dollar and euro, the rand by about 7% so I think the
pound/rand exchange rate is around 21 pre Brexit and is around 19 now so
I think the rand/pound differentiation is not as significant.
Aston Woodward – Now we are seeing sterling devalued, I think yes there is a
buying opportunity for overseas investors. What is interesting is some of
the overseas REITS have taken a lot of subscriptions as a reaction to the risk
associated going forward in the U.K. The REITS with a premium associated with
UK and European holdings have lost some of their value to reflect this new
risk. A big question for the South East office market will be over the
occupational piece.
James Silver – It is too early for us to react too much at the moment. We are
building out about 600,000 sq ft in the South East and what we have done is
ensure That we have bought and developed the best in the market in terms of
specification so we feel positive. Actually thus far it has been strong in
terms of continued talks on letting space.
Ed Smith – People have been getting to a lease event. That is the reason
they move and the days of the huge expansion were gone in 2000/2001. It has
really been about moving from a poor building to a good building.
Ryan Dean – Lots of investment decisions have been made on the back of
forecast rental growth, post the Referendum where will they be going?
Ed Smith – We have not lost a deal or seen anybody call off negotiations
but the bigger houses that work with a larger number of corporates are all
thinking should they be committing tenants to a lease now if they have time on
their hands or should they be waiting a couple of months longer. I am seeing
that a little bit in larger ones that have a larger time horizon. So somebody
who is looking at a prelet and they are in a market where they can possibly
pick up an existing building between now and their lease expiry then the advice
they are being given is "we might have reached the top and you might get a
better deal in two months’ time" so there might be a bit of that going on
but fundamentally businesses still need to move.
Richard Bourne – We have a couple of vacant buildings that have been recently
refurbished and are now under offer. We have two lettings in Potters Bar where
both the tenants have a lease expiry on their existing building which is going
to residential so they have to get out. They are chasing me daily even after
the vote.
There are still people who are going to be forced to make decisions. We
have a building in Watford, only 4,500 sq ft, but we had five tenants fighting
over the building and we drove rents from £24 per sq ft to £26 per sq ft.
That is driven by five people who are desperate to take space and need
to make a decision. So as much as there has to be caution and the big
corporates will have to rethink about committing to multimillion-pound
occupation costs there are a number of reasons why people have to move whether
it is contraction, cost saving, higher profile branding, lease events or it is
a need to improve efficiency.
James Silver – Most of the markets have limited supply.
Ryan Dean – That’s the key that we have not seen before in previous
situations. At Knight Frank we see the M25 vacancy rate at about 5.5% and yes
there is some stock coming through and it is going to move vacancy out a bit
but nowhere near back to where we were in 08/09 or early 03 levels where there
was so much space on the market. So fundamentally that is quite different.
Aston Woodward – In some ways it could actually be quite helpful. So let’s say
the balance of power goes a little back with the tenant and they can start to
squeeze landlords that might unblock things and make things happen and could
actually generate some activity.
Rob Bray – But I don’t think a lot of the deals we do are about rents – it
is within a bracket but if we are talking a pound or two a foot that does not
impact decisions.
Richard Bourne – We have focused our buying strategy purely on where the supply
is low or decreasing and demand is strong as that is where you are going to see
rental growth and keep the building let, cash flow is king. I have not seen
tenants pulling back on rents, in fact the opposite. I think simple economics
would suggest that rents won’t stop moving on because we haven’t had the supply
in recent years. There is less space for tenants so they will pay extra for the
best space.
Chris Lewis – Is there a risk of a lot of grey space coming on to the market?
Ed Smith – The announcements are more City based and not so much Thames
Valley where we are. This market is not so exposed to the likes of HSBC moving
their headquarters. I think our biggest stress point will be companies from the
States who are here looking at their European headquarters that may be
impacted. There was an announcement earlier today for instance about Vodafone
questioning whether their headquarters should be in the UK.
Ryan Dean – But that is the corporate headquarters in Paddington. Not to be
political but this could be bigger than just what has happened in the UK which
means actually would Vodafone be wise to move to Germany knowing what could
unravel across Europe. Who knows what will happen? So if you have something
that is working are you going to see that out for a little bit to work out what
will happen? If those rents start to fall off in Central London does the
discount in West London of £50 per sq ft start to have less of a pull than it
did?
Ed Smith – Possibly but those rental rises have only been because local
occupiers have moved from poor buildings to the new quality buildings that have
been delivered in that period. Because we haven’t actually seen anybody move
from the West End to Hammersmith. Has anyone mentioned that Ocado signed for a
150,000 sq ft deal on Thursday? That is obviously a business that delivers to
UK households.
Ryan Dean – It is a big business with a 1,000 people and they could have
delayed their decision but they simply had to do it.
Rory Carson – If you think back to the dotcom crash, the grey space that came
onto the market was from companies that were expanding quickly having signed
big pre-lets. It went from being a massively undersupplied market with lots of
demand to a hugely oversupplied market. In the South East, however, it
was a far more balanced situation, with demand fairly consistent throughout the
cycle. Take-up since the credit crunch has often been driven by people
going to better buildings and using them more efficiently. The supply and
demand dynamic is pretty positive and I think that occupiers are, mostly,
right-size at the moment.
Rob Bray - The fundamentals of the UK property market are very sound. There
is not a massive oversupply in that respect and the English language is so
important.
Richard Bourne - They have a skilled workforce in companies like Vodafone so
those decisions are not going to be taken lightly - the costs of taking an
office and moving somewhere else is going to be huge.
Richard Talbot Williams – The national investment team has
continued to do deals and where there has been a change they have been value
add, up the risk curve deals and where they have come back they have been “we
want to trade at a different price or we are not sure whether we want to
trade”. That has been two or three smaller deals. But I think in the more core
stuff it has been income deals and it has been business as usual.
Chris Lewis – Is it sterling buyers that have been saying, “give me a bit more
time or I need to a have a chat about it?” or was it overseas buyers?
Richard Talbot Williams – It is generally overseas
money but backing UK asset managers.
Richard Bourne – In the press it is often big deals that are talked about
but if you get under the skin of it the smaller lot sizes and buildings are
still performing well both occupationally and investment wise. Look at auction
houses, they have been absolutely rammed to the rafters and there have been
high success rates off the back of that.
Phil Sturdy – A lot of the private buyers at auctions are investors who favour
commercial property over an over taxed residential investment market now?
Richard Bourne – You have a two tier market in terms of large Institutional lot
sizes and smaller private lot sizes. You can see the attraction for the private
investor. There are always opportunities I am fascinated to see what happens in
the July auctions. We have two assets going in there so I hope it continues. I
think the smaller end of the market has been boosted by the tax on buy-to-let
resi. Investors are switching to commercial assets to get better returns.
Chris Lewis – The smaller lot sizes have gone very well since the start of the
year. I have sold for L&G in Crawley and had 15 to 16 viewings. The council
bought it in the end but we saw a lot of aggressive viewings.
Phil Sturdy – We are seeing a lot of the councils buying and it
is not council pension fund money buying, but council balance sheet money. The
councils previously put money into Icelandic banks so UK commercial property
does not look so bad!
Ryan Dean – The big 80,000 sq ft deals get the headlines yes
but from Knight Frank’s point of view we are still about sub 15,000 sq ft on
average. All the buildings that you guys are developing have to be sub
divisible and let in part and most of those businesses are 100 people or less.
So actually the engine room that drives the market isn’t the big deals and I
think the leasing advisor now is probably going to say take the deal in hand
and get on with it.
Richard Bourne – And of course you are derisking the asset if it is multilet.
James Silver - If you look at the Thames Valley the market is about making space
for communities.
Ryan Dean – In an occupational market that is more diverse than central
London we are not reliant on the banking sector. Financial sectors have been a
great part of take up in the last year but actually across the board it is
pretty diverse.
Aston Woodward – I think the City will change. If you look at Bloomberg, Soho
House, and many other changes due shortly I think the City has got quite a lot
to offer. You cannot really question a tenant that occupationally chooses the
City. Okay it may not fit your ethos or your culture but it has a lot to offer
still. I think the market will be quite interesting because the rents compared
to other markets not far from the City make the City look quite good value. It
has good fundamentals.
Chris Lewis – What about overall occupational costs?
Ryan Dean – We had already seen pre the leave decision people looking at
taking elements of businesses out of central London. So keeping a front of
house in town and looking at decanting people out.
James Silver – I haven’t seen any real evidence of it yet.
Ryan Dean – In somewhere like Croydon you are seeing it with EDF and HMRC.
Ed Smith – Time Inc in Farnborough and Maersk in Maidenhead.
Ryan Dean – They actively said they would move people out there. People are
more mobile than they have ever been. If you talked to a 24-year-old guy in our
office and said you have to go and work abroad I don’t think it would be
feared. Staff are more mobile.
Rob Bray – What we are seeing and what we will continue to see is the
impact of resi. It has been a fairly amateur market in PDR. We are looking at
one now and thought do these guys want to spend £20m on a refurb of this kit in
this environment or do they think we will move on and take that money in this
environment and buy a bargain somewhere else over the next six to 12 months? So
it has almost come back into our hands a little bit. We could not get anybody
to answer a phone and then in the last two days we are being asked could you
just clarify this and this. Everybody knows the PDR market has had a big effect
on supply in a lot of towns, to the detriment I think in some cases to the
office market. I got an email from Taylor Wimpey a couple of days ago saying as
you can imagine we are taking stock of things and we can’t make a decision on
this. But I have others who will jump in if there is an opportunity. There is a
massive undersupply and the planning system is slow and cumbersome."
Ed Smith– It is only in the very high residential value areas where it is a
problem. We sold an office building about a month ago in Gerrard’s Cross - only
10,000 sq ft at £500 a foot - unconditionally you would have to let it at £45 a
foot to the government for 20 years to get the same value and you would have to
spend £100 a foot on refurbishing so I think affluent areas around the M25 will
continue to see an erosion of office stock and they will move to the big ones
like Uxbridge for example. There were four or five businesses who all want to
stay in Gerrard’s Cross but they can’t because residential values are so high.
Ryan Dean – In St Albans, yes rents have gone up but actually getting a new
occupier to relocate into that town is really challenging which could be quite
detrimental to the town. So yes from a landlord point of view it is fantastic
but actually from an occupier point of view it is a real, real challenge. We
have had a couple of things from a refurbishment point of view with a landlord
saying let’s just check the PDR thing again.
Richard Bourne – We look for a Plan A and Plan B where an
investment asset will also stand up as a resi development. It is a defensive
position. It works as a plan A with rental growth coming through and if the
occupational market dies then we have a backup option. There are two ways to
make a return on the investment.
Chris Lewis – Spec development will probably be put on hold.
Ed Smith – It will probably be put on hold because there is almost enough
coming through.
Aston Woodward – It was almost like the catalyst to it slowing
down. It feels like there were a lot of things that are a good stress test for
the UK economy. We have some really good people and companies and they will
come back fighting as those things they do are on demand on a global basis. We
have to be confident in backing the UK.
Ryan Dean – Total offices under construction is 3.2 m sq ft. From our stats
average take up is 2.6m sq ft. So if there is this pause there will be two
schemes being delivered in 2018 so there will be a slowdown in new speculative
development. We will see more buildings go out for alternatives whether that is
resi or other uses. Tenants want to see more place-making big towns that need
some significant redevelopment. If that gets delayed it could be negative for
the town.
Which of the locations are primed to win across the South East?
Aston Woodward – It so much to do with the characteristics. It is
amenity, skilled labour force and infrastructure.
James Silver – It is about being in town centres where you know your staff are
going to be happy.
Ryan Dean – When they are trying to change structurally it is about
different drivers. The infrastructure changes for the South East are quite
significant whether it is the Elizabeth Line, the Bracknell town centre
regeneration or West Ham in Croydon.
Rory Carson – One thing that might be derailed following the change in Tory
leadership is Heathrow.
Phil Sturdy – Gilt yields are at historic low rates so now is a great time for
the Government to be borrowing to fund infrastructure projects.
Richard MacDowel – In terms of our risk exposures, we are well
spread across sectors and regions. From my understanding of research done by de
Montfort, I understand the UK clearers have been focusing more on London over
the last 18 months and grown market share there (vs non-bank lenders) where you
would have expected increased market share in the regions. We are happy with
our footprint: We are a UK wide platform so that is a marked point of
differentiation for us and we have been active in the regions as well as
backing our share of deals in central London and the South East. We watch to
make sure no overexposure in any one area, but otherwise we are not top down
strategy driven, but rather borrower and opportunity driven.
Aston Woodward - How are you affected by the competition of overseas lending
coming in?
Richard MacDowel – The market share of all of the UK clearers
has decreased over the past 6 to 8 years. This is probably no bad thing as it
results in a more diverse and liquid debt funding pool. Overseas lenders are
part of that diversification trend.
Phil Sturdy – German banks are not talking about retracting but they will be
more conservative lenders in terms of lower LTVs.
Richard Talbot Williams – The lenders who have agreed
lending ongoing will complete. But if you go to ask for new terms you are
probably not going to get a great deal.
Richard MacDowel – UK clearers have seen market share
reducing over recent years. As I have said this is probably healthy. I think
Brexit may see this market share erosion stabilising if not slightly reversing
as overseas lenders may refocus on home markets while the UK clearers continue
here. Within Lloyds Banking Group, we have Scottish Widows, our own insurance
business, and they remain open for lending where the term is longer-dated, 10
years and above. Pricing is very hard for them just at present as bond prices
are very volatile post Brexit, but this will quieten down to allow them to
continue. The cost of this longer-dated money has been attractive in the run up
to Brexit and we expect this to be the case going forward.
Ryan Dean – On a global basis structurally we are still in a good place.
Richard Bourne – How are we going to price property right now? It is still
cheap compared to other asset classes so I cannot see yields moving very far.
The risk free rate is now the lowest it has ever been – 10 year government
bonds are sub 1%. The arbitrage remain irrationally wide.
Phil Sturdy – Property’s unique selling point is its income return in a lower
for longer interest rate environment. There will be more divergence of
performance with core income being more defensive and outperforming the more
risky, secondary assets which will be vulnerable to value declines. It will
take three to six months to discover where secondary pricing settles.
Aston Woodward – I agree on the property side but sentiment is the unknown
factor. The discount will be driven not by the value of real estate compared to
other asset classes but by UK sentiment and how people feel about life.
Secondary property will be under pressure. I do think property in the scheme of
things still looks good value. Meanwhile there is likely to be a great period
of buying opportunity.
Richard Bourne – We as an industry have to move forward. RO will continue to look
at towns with strong supply and demand fundamentals and I am not going to
discount them as a buying opportunity going forward. It will come down to
pricing against alternative returns and focusing on our core strategy.
Phil Sturdy – The extra stamp duty costs will encourage investors to hold
assets for longer to write off the extra stamp duty costs.
Chris Lewis – That is the risk. How desperate are they to sell. The biggest
risk is nothing happens.
Richard MacDowel – The economy has been on a downward
trajectory even before Brexit and if you are looking at the yield curve and
swap curve it looks like markets expect growth to be tough going forward. We
are cautious about where values might get to. All things being equal, the cost
of capital has gone up due to volatility and uncertainty. So even if one’s
assumptions of real estate cash flows remain constant, values will drop to some
extent. But this in itself will provide opportunity for the astute investor
community and the key question is by how much values have to drop before they
come back in.
For further information:
Kirsty Allan, Tavistock
020 7920 3150
Notes to Editors:
RO Real Estate is a
privately-owned company specialising in commercial property investment and development
in the south east. It is the property division of the RO Group, which has
majority interests in businesses involved in residential development,
high-quality holiday lodge developments, domiciliary and specialist care
services.
