June 2008 Archives

The Times recently stated that "Canary Wharf, the Docklands developer, may have to take a writedown of several hundred million pounds to reflect the declining value of its skyscraper office estate over the coming months as it feels the squeeze from the redundancies affecting its banking tenants".

It also addressed the fall in capital value for the estate, which dropped by 4.3% over a six month period up to December 2007. On December 31st 2007 the portfolio was valued at a reduced £7.27 billion, despite the addition of new buildings to its estate.

With staff redundancies continuing and an increasing amount of space being made available to sublet, which industries are likely to fill the vacant stock that is being left behind?

The recent struggle from the turmoil in the financial markets appears to have already resulted in a bitter taste amongst many in the property industry, and further problems could be on the horizon.

In a note released in the Times last month headed "Keep the tin hats on", HSBC, said that hard-pressed tenants would start to demand rent cuts from their landlords and promptly trigger a sell-off in commercial property stocks.

HSBC said that a shift in the balance of power to tenants undermined the case for long-term investment in commercial property and it downgraded every real estate stock that it covers.

Although problematic for the investment market, these cuts may be a necessity if occupier demand is to remain robust enough to see the market through the current period of decline.