November 2009 Archives

The European stock markets took a hit yesterday after fears surrounding Dubai's debt problems spread. The FTSE 100 index suffered its worst one-day hit since March falling by 3.2% and banking shares took a battering as investors worried about their exposure to the debt-laden emirate, £48 billion in debt to be precise. 

Almost £14billion was wiped off the value of Britain's biggest banks yesterday as the financial crisis in Dubai sent shockwaves around the world. Investors were further spooked by reports Dubai's neighbour Abu Dhabi will not step in to help this time round. Speculation that European banks are exposed to roughly half of Dubai World's debts caused their shares to collapse.

But what will these debt fears mean for London property?

Property investors and brokers are talking up the prospect that the sale of financial investment firm Istithmar's international property, could raise hundreds of millions of pounds.

Dubai World's investment arm has investments in Adelphi on the Strand and the Grand Buildings in Trafalgar Square, in London.

Istithmar sold two developments in the West End last month to Great Portland Estates for much less than it paid for them two years ago.

 
It is thought that it will retain a share of the profits in the buildings in Regent Street and near Oxford Street.

 
King Sturge said prime international real estate was more likely to raise cash quickly than domestic assets and there would be a "feeding frenzy" for some of the buildings in the West End.

UK Property investors are drawing up lists of the property assets of the various Dubai property arms. P&O, which DP World owns, has a £1bn global property portfolio.

 
A minority stake it has in Elizabeth House next to Waterloo station is for sale as is the majority ownership of Morgan Stanley real estate funds.

The crisis could also stem the flow of Middle Eastern investment into the capital, something which has been protecting the market by propping up investment sale volumes. But it would be to soon to panic. Not all Western interests in the emirate will be affected and there is still the likelihood that Dubai will pull through this and return to growth.

We should wish it all the best, writes Allister Heath of City A.M., because if it fails, the lesson that many in the Middle East will draw from the crisis is that openness to foreigners, peace and trade don't work. The only winners then would be the extremists - and then we would all be in real trouble.

Investment activity has certainly improved as we have progressed throughout 2009 and things are clearly continuing to heat up, with investment bank Evans Randall poised to sell its Milton Gate development in the City at a profit less than six months after purchasing the property.

And we are not talking about a small scale return either. It is believed that the property, which is let to Addleshaw Goddard, has been placed under offer to Mutua Madrilena, a Spanish insurance company, for around £152 million, representing a 6.25% yield. This would see Evans Randall receiving a profit of £25 million on an asset it purchased in June of this year.

King Sturge partner, Patrick Cryer, said: "Evans Randall has taken advantage of the wall of equity ready to buy in the City and realised a 125 point yield shift in their favour. The market will not be surprised that it is under offer to a Spanish investor as they have been particularly inquisitive in the last quarter of the year."

To read about how the London investment market has performed this year please click here.

It emerged today that London firms are to be hit with a huge business rate tax increase over the next five years.

Following the sharp rise in property prices in the run up to the recession companies in the capital could face rises of thousands of pounds, something which politicians have urged the government to address as many firms are already struggling to tread water and stay affloat.

Shadow London Minister Justine Greening has said: "London businesses will face significant business rate tax rises at the very time they can least afford it. The Government should be helping firms not kicking them while they are down and struggling to get back on their feet."

The proposed £1.9billion increase will see Westminster fair the worst, with its average rateable value up £47,000 last year compared with five years earlier. The second highest was Camden at £24,000, followed by Kensington & Chelsea at £22,000 and the City at £18,000.

The tax is based on property valuations as at 1 April last year, since when commercial rents in London have fallen by up to 40 per cent.

After shelving its £540 million proposed relocation last year, News International's plans to redevelop its Wapping HQ in East London have now been approved by the London Borough of Tower Hamlets.

The redevelopment by Amanda Levete Architects is to incorporate a 1 million sq ft campus-style scheme with 924,000 sq ft of offices, as well as involving the remodeling of the Print Works and the adjoining grade II-listed Rum Warehouse building.

The plans had been placed in doubt after London Mayor Boris Johnson said in June the proposals did not comply with the London Plan. He said they needed to be altered in terms of biodiversity, climate change and transport.

It is at present not known when News International, advised by DP9, will put these plans into action, and it is expected that any works will coincide with the economic recovery.

A design for Gasholder number 8 at the King's Cross development site has now been chosen.

Originally constructed in the 1850s, the distinctive 25m high circular guide frame is a grade II-listed structure which currently stands to the south of the Regent's Canal.

A competition has been running for budding architects to submit their designs for how the space should be used and incorporated into the King's Cross scheme. The King's Cross Central Partnership has now made its decision and selected Bell Phillips + Kimble architects for a £2.5m redevelopment of structure.

The partnership between Argent, London & Continental Railways and DHL-Exel said Bell Phillips + Kimble won over the judging panel with an "intelligent interpretation of the brief, combining an events space, playable features and imaginative public space".

The design places inside the gasholder structure a water pool and garden, flexible internal spaces and a natural amphitheatre for informal performances and relaxing.

To mark the culmination of the design competition, an exhibition is opening at New London Architecture on Monday 16 November and will run for three weeks.

The exhibition, '80 for No 8', features all of the 80 submissions received for the competition with a special focus on the shortlist.

Arab Investments expects to win planning permission next month for a viewing gallery for its Pinnacle skyscraper development.

The gallery would be developed as a multi-storey 743 sq m (8,000 sq ft) space enclosed by a cascading glass roof and offering the highest viewpoint in the City, together with the museum of London.

The Pinnacle restaurant will be below the gallery, on levels 53 and 54. It will offer the highest dining experience in the City of London.

But with the Heron Tower and the Shard of Glass also set to provide viewing points of the City, the question is will there be enough demand from the general public to warrant another platform in the sky?

Other cities such as Melbourne have failed to see enough demand to warrant more than one viewing platform with it's two observation decks in the Rialto Towers and Eureka tower; it subsequently ended up not being viable to run both and now Rialto is being shut at New Year.

I personally think the drive from British tourism will warrant another "different" view of our developing City and I for one will certainly be keen to take a look from above.  

Red ribbon sales have been few and far between in the West End this year with development continuing to be choked by the recession. However today is the day to dust of those ceremonial scissors for an outing.

The Peak, in London's Victoria, the property in question, which stands in all of its glory outside Victoria station.

The curved glass roof, peering over the 11,000 sq ft floor plates, appears to push the boundaries of the conventional office block design. Built with the aims of the Mayor of London's policy on sustainable design and energy efficiency in mind the building is expected to lead the way in the future redevelopment of the area, with a new profie of occupier being drawn to the Victoria and a very limited supply pipeline set to ensure the building is top of the list of those with requirements. 

The steel roof structure envelops two office floors and a roof top plant, all contained within an asymmetrical barrel vault. The curved roof sets forward from the Apollo Theatre and reaches towards the north. At levels seven and eight, the floor plate's step back forming terraces beneath the cantilevering roof to create depth and interest in the prominent structure.
 
It all sounds fantastic, all we need now is to see some letting activity!!!!

 

To hear from existing occupiers in Victoria and why the scheme is unique, both in position and design, click here.

Senior property executives branching off and setting up niche agencies is currently all the rage and another new firm targeting EA Shaw and Farebrother's stomping ground has come onto the scene.

Ray Walker, Rhys Evans and Paul Dart are the new men in town riding the sparkling Monmouth Dean wagon. Walker was previously head of West End office agency at NB Real Estate, while Evans and Dart were partners at E A Shaw.

The firm, set to be launched in the New Year, is to target core Midtown and Covent Garden, as well as Soho and Noho and believes there is a gap in the market for a firm that incorporates these sectors collectively.

It is not set to be all plain sailing though, the risks are always s going to be there when you leave a larger firm, but Walker feels that there is enough activity out there to support the new organisation.

Monmouth Dean has certainly identified a distinct target area of operation, but it is likely to face stiff competition from the established agencies already operating within this area of the market.

Let's hope it's not going to end up with pistols at dawn.

BlueCrest Capital, one of the UK's largest hedge funds, is moving a significant proportion of its operations to Geneva amid growing concerns about London's status as a centre for alternative asset managers. Founded in 2000 by former JP Morgan traders Bill Reeves and Mike Platt, the $15.5 billion firm is the third largest hedge fund manager in Europe. It is looking to relocate around 50 staff from its base at 40 Grosvenor Place, SW1.

The recurrent theme of firms moving / choosing overseas locations is posing concern for the capital, but are these moves purely down to the better tax treatment offered outside of the UK? Robert Mathieson, branch director of Geneva-based Key Real Estate consultants, thinks not. "Tax will play a minor part in decisions to come here", he says. Instead, Geneva's role as the centre of oil trading and private banking is likely to prove a much bigger draw. "Those companies trading in commodities come here to be with their industry in the bars and restaurants," he says.

The one drawback for firms though may be the difficulty in obtaining both commercial and private property. Commercial vacancy rates are 2.25% with average rents of £30 per sq ft and prime rents of £60 per sq ft. And for staff looking for accommodation, the Swiss housing market is constrained. Owner-occupiers amount for just 20% of the market, while the remainder is owned by third parties. Of that, up to 25% is institutionally owned while the rest is rented.

A foreign national is not allowed to buy unless they are in possession of a work permit, or the property has been allocated by the Swiss government for foreign sale.

Tenants appear to be sitting slightly less comfortably than 6-12 months ago, when they had the pickings of good stock at bargain values, and the current lack of good quality grade A space is certainly starting to be an issue for occupiers looking to move now or in the near future.

The current situation certainly is not making life easy for tenants looking to improve the standards of their properties, and the prospect of committing to a prelet above market rent or taking on an expensive grade B refurbishment when funding is tight appears to be the only option for some.

There is however an alternative. Tenants with enough capital could decide to get in on the action by increasing the volume of owner occupied buildings, with tenants deciding to invest while prices are low, develop grade B space and sell once the market recovery is in full swing.  

This is an option which surely would be good for the market, as grade B space is recycled ready for the demand for top end stock as we head into 2011-2013.

Sustainability and "green development" has been the focus of many debates recently and was one of the main topics touched on at the EG offices summit hosted earlier today. The conference focussed largely on occupational demand and addressed the need to go back to basics when approaching the topic of sustainable development. Paul Edwards, head of sustainability at Hammerson, addressed the topic highlighting the confusion caused be having 188 rating tools available for assessing an offices "green rating". He went on to indicate the need for more in-depth research to be undertaken to gather information on more than just conceptual usage but actual usage, and how economical a building actually is for an occupier once built.

Green development does seem to be moving up the wish list when it comes to tenant demands with roughly 40% across the board willing to pay more for a green building, according to a survey undertaken by Savills. However it appears that when it comes to the crunch many will not follow through on their standing. A recent report by trade body CoreNet Global and consultant Jones Lang LaSalle showed that more companies were considering the environmental impact of their letting contracts but only a minority were prepared to actually shell out more cash to make a greener choice. This presents the prospect that the perception of being green is just as important as being green itself, something seen as not necessarily feasible in times when finance is tight.  

The survey suggested that companies were more focussed on their short term strategies which are easy to implement such as energy efficiency programmes and waste recycling.

Two-thirds of respondents described obtaining funds to implement sustainability strategies as a "difficult" or "extremely difficult" challenge, although nearly three-quarters said they would be willing to invest in refurbishing their owned assets to hit sustainability targets.

"The findings of this survey provide stronger evidence than ever that sustainability concerns are impacting on corporate real estate decision-making," said Julie Hirigoyen, lead director of Jones Lang LaSalle Sustainability Services.

"As this message filters through the markets, we may begin to see signs of a two-tier market emerging whereby buildings that do not meet certain sustainability standards incur higher rates of depreciation and obsolescence," she said.

With agents struggling over the past two years, capital values tumbling, and rental estimations plummeting the small glimmer of light on the horizon has provided a welcome lift in sentiment throughout the London office market, but just what has all this meant for the office block itself?

Some estate agents believe that there will be no market for solo office blocks in the future. One said: "The days of building a solo office block are long gone. Mixed use, residential and commercial, is the way forward for property development. The office element is the most challenging to let. The fall in rents has been so severe and there are no tenants around. Retail units may be easier to pre-let and residential units will sell because of the hot market."

Mixed use schemes certainly appear to be a sensible option as we look forward, however it is important to highlight that they do not come without some technical and planning difficulties, juggling space to meet numerous requirements.

 
I think while it is important to offer a mix of uses to tie a building in with the community, and by doing so lower the risk in the investment, it is also important to remember that every case is individual. There are still large floor plate requirements out there, with tenants hunting for high quality pure office space.

Around 30 Lovells Staff - together with clients from Barclays, Eli Lilly, ITV, Lloyds, PricewaterhouseCoopers and Prudential - abseiled from the 11th floor of Atlantic House, Holborn Viaduct, EC1 to raise money for charity.

The fourth annual abseiling event, on the 26th October, was part of the firm's fundraising campaign, which this year is raising funds for sight-saving charity ORBIS and sports charity ParalympicsGB.

Sixty people braved the ten storey drop with Prudential's Will Lowndes and Lovells partner Dan Norris completing the challenge dressed as Batman and Robin, while Emma Riddle and Julius Kotzenburg of Barclays descended as Star Wars characters Princess Leia and Darth Vader.

Phil Lane CEO of ParalympicsGB and paralympian Dervis Konuralp also took part in the event, and videos of their decent can be seen here.

Lovells hopes to raise up to £10,000 for the charities this year.

Maybe these sporting fellows will be "roped in" by Camden Council which appears to have come up with a new way of insulating tower blocks. To read more visit the London Residential Blog.

Despite development activity across the capital remaining restrained over the past year, activity has certainly been ploughing on at the proposed new HQ of JP Morgan down at Riverside South in Docklands.

Following the laborious task of anchoring the site (which lies below the water line) to allow for  full excavation work on the foundations to take place, construction appears to be finally moving in the right direction. 

Paul Wellman from the research team took these pictures while out and about yesterday, identifying that there has been clear progress with the huge wire frame slab which will be filled with concrete once completed. The huge raft will cover the footprint of the site over the tops of the recently sunk piles.

The scale of concrete involved to cover the site will be approximately 50,000 cubic metres amounting to the delivery of 8,000 truckloads of concrete.

I think that it is safe to say that this next stage could take some time and an estimated completion date of December 2011 still appears to be rather optimistic.

British Land has approached young architects to find uses for the City's abandoned 'cheese grater' tower on Leadenhall Street, EC3.

More than dozen young architects have been shortlisted for a temporary solution competition to fill the Richard Rogers' site which appeared to come to a standstill last summer.
The move by British Land has reportedly come as a shock to Rogers Stirk Harbour, which was only told of the plans earlier this month.

Opening up vacant plots is part of a wider initiative by the City of London's planning authority to force developers to turn to alternative uses for sites indefinitely put on hold by the credit crunch.

Shortlisted firms include Building Designs Young Architect of the Year 2009 , (Due to take place tomorrow), finalists Duggan Morris and Glowacka Rennie along with 2007 winner, Carmody Groarke, with submitted ideas for the Leadenhall tower site ranging from a city farm to a viewing platform.

The winning design, which could sit on the site for up to five years, will be announced by competition organiser Wordsearch in the next few weeks.

The Corporation of London is determined not to have the Square Mile riddled with derelict plots and one shortlisted architect said the developer had been "bounced" into the initiative. British Land declined to comment.

The much talked about site, which saw the bottom up demolition of the former Leadenhall Building, was initially due for completion in 2011.