Office market weathering the storm better than expected

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With rental growth in prime London offices set to outpace the rest of the country, the doom mongers predicting permanent working from home (WFH) and office flight have so far, it seems, been on the wrong tack.

Quarter 1, 2022 has seen rent returns rise as UK commercial property recovery generally has been gaining pace, also in warehousing and logistics as well as retail parks. The government’s drive to prime the regions in its levelling campaign, supporting communities’ recovery across the UK, it is hoped, will further boost commercial property.

In it latest RICS Commercial Property Survey, agents are reporting a considerable increase in the number of new tenants looking to rent UK commercial property, “with the uplift particularly prevalent in prime London office space.”

Says RICS:

“Respondents to the survey saw a notable increase in UK office demand in Q1 2022 with the net balance improving to +30% from a flat picture at the end of 2021.”

This shows a significant change in sentiment, which was also beginning to appear in the retail sector, with occupier demand approaching net neutral (-1% net balance). That’s the first time the measure has been anywhere near neutral since early 2017.

Taking in commercial property as a whole, it’s the first time since 2015 that a net balance of +32% of respondents in the RICS survey reported an increase in occupier demand at all levels and across sectors (retail, office and industrial uses).

RICS property agents reported that investor enquiries also saw a substantial increase in early 2022, with the strongest figure since Q3 2015, and a net balance of +32%. RICS says that for the first time since 2017 investment enquiries are now net positive across the three traditional market sectors: office, industrial and retail.

The impact of working from home (WFH)

There’s been much discussion in the media about the impact of home working on city centres, transport, retail and offices. The COVID pandemic disrupted labour markets dramatically during 2020 and 2021, when millions of people were furloughed or losing jobs.

There was a rapid adjustment to homeworking by many thousands as offices were closed to all but a few staff. Many other workers in the vital services were deemed essential and continued to work: in hospitals and grocery stores, on refuse collections and in warehouses, as well as the police and to some extent, the courts.

The post-pandemic economy will undoubtedly change, in many cases for the better, with more flexible working, more omni-channel retailing and home delivery, with much enhanced productivity and innovation through the proficient use of technology.

The question on everyone’s mind in commercial property is, “what affect with this have on rental demand, will occupiers require less space and therefore economise by downsizing?”

Toby Courtald CEO of Great Portland Estates (GPE), one of London’s biggest landlords has conceded that offices will never be quite the same, never as busy as they were before the pandemic, though he is adamant that those who have been predicting “the death of the office” have got it wrong.

GPE owns a multi-billion pound mainly office estate in London and has also swung back into profit this year announcing an end-of-year profit of £167 million at the end of March. The estate’s portfolio valuation increased by £2.65bn or £6.1%, across the year. During the year the property RIET agreed new leasing deals of £38.5 million, a figure that went well beyond the company’s expectations.

The nettle that most office landlords appear to have grasped is they will need to adapt their office space to the post-pandemic requirements, along with the changes needed to meet the new environmental standards, most notably insulation, energy efficiency and air quality. These changes will involve substantial new investment.

In British Land’s case, office investor demand, according to RICS, rose from a net balance of +5% at the end of 2021 to +23% in Q1 2022, and the net balance of respondents predicting a rise in capital values for the prime office sector is the most positive since Q4 2019 (+37% net balance).

With the increase in occupier demand for new office space, rents are expected to rise with a net balance of +19% of survey respondents expecting a rise, compared to +7% in the last quarter of 2021.

Rents for prime office space in central London are anticipated to outpace most other UK regions, while the South East is the only region in which secondary office space is predicted to see growth.

The latest research published by RICS in March has shown that high-quality and well-managed commercial real estate – such as prime office space – is integral to levelling up UK towns and cities*, and one of the asks of the research is that UK Government support commercial real estate, and promote investment in it, to secure levelling up across the UK.

Tarrant Parsons, RICS Economist, says:

“The latest survey feedback points to demand from both occupiers and investors gaining momentum over the quarter, with the office sector in particular now showing signs of recovery.

“This has led to an upgrading in expectations for capital value and rental growth across prime offices, while the prolonged downward trend in portions of the retail sector also now appears to be easing.

“That said, given the current headwinds facing the UK economy in form of sharply rising energy prices, higher interest rates and general cost of living pressures, there is understandably a lot of caution regarding the potential impact this could have on market conditions going forward.”

Jonathan Hale, Head of Government Affairs at RICS, adds:

“UK commercial property is clearly still attractive to investors and UK Government should work across the country to engage with the sector to build on this positive outlook.

“The recent RICS commercial real estate impact report emphasised the key role that the commercial property sector currently plays in the UK and its future role in driving forward economic recovery across the UK.

“As town centres, high streets and offices start to recover following the pandemic, a thriving commercial real estate industry will be crucial to support the government’s levelling up and net zero ambitions in the months ahead.”

Warning: of course, all of this was in the last period: in these times of rapid economic changes things can turn around quickly. With a raging war in Ukraine, inflation approaching double figures and a threatened recession the picture may be less optimistic in 12 months’ time?

Full RICS survey report here.

*This data follows the publication of the RICS Commercial Real Estate impact report, which found that high-quality and well-managed commercial real estate is integral to levelling up UK towns and cities and contributing to better spaces and amenities for local communities. The sector’s contribution – across retail, office and industrial uses – makes up 3.3% of the total UK GVA, employs 3.5% of the total workforce and generates 2.5% of the UK tax revenues.

About RICS – Everything we do is designed to effect positive change in the built and natural environments. Through our respected global standards, leading professional progression and our trusted data and insight, we promote and enforce the highest professional standards in the development and management of land, real estate, construction and infrastructure.

Our work with others provides a foundation for confident markets, pioneers better places to live and work and is a force for positive social impact.

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LATEST: New report reveals big jump in landlords facing rent arrears

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More than a third of landlords have experienced rent arrears during the past 12 months – a clear indication that the cost of living crisis is starting to hit home.

Paragon Bank’s latest Landlord Report shows that 36% had tenants in rent arrears which, although only based on a survey of 621 landlords, is a big jump from the most recent Household Resilience Study which found just 7% of private renters were in arrears during April-May 2021.

Damaging reports

Landlords have had to contend with a range of other issues too, with almost a quarter (24%) coping with property damaged by tenants, and as a result, 23% had to withhold all or part of a deposit.

Paragon also found that 13% suffered anti-social behaviour from tenants, 13% had sought vacant possession, 11% used legal services, 8% made an insurance claim, 4% experienced sub-letting and an unlucky 1% had squatters. Despite this, none of those 621 questioned had missed a mortgage repayment.

Good job

Landlords largely do a good job and most of their renters are happy, the report found, which found that 91% have a positive relationship with their tenants and 88% had been very or extremely flexible with tenant requests.

Research for a Social Market Foundation report, commissioned by Paragon, found that 81% of private renters are happy with their current property, and 85% are satisfied with their landlord.

Paragon Mortgages MD Richard Rowntree (pictured) says: “It’s interesting to see that considering how properties meet the needs of tenants is central to landlords’ investment strategy and more important than generating high yields or capital appreciation.

“This is perhaps at odds with the negative perception of landlords who are sometimes viewed as placing profits above people.”

Paragon also found that landlord demand for city-centre property was strong last year, with house purchase completions in urban postcodes increasing by 100% compared to the year before. Milton Keynes was the city with the highest buy-to-let completion growth (667%), followed by Manchester (300%) and Bristol (300%).

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – LATEST: New report reveals big jump in landlords facing rent arrears | LandlordZONE.

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BREAKING: Grant scheme for air and ground source heat pumps opens for landlords

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The government has today officially opened its Boiler Upgrade Scheme for applications including those from private landlords.

Operated by the Department for Business, Energy and Industrial Strategy, it offers applicants it offers grants to encourage property owners to install low carbon heating systems such as heat pumps, it will now run until 2025.

Landlords can receive up to £5,000 off the cost and installation of an air source heat pump or £6,000 off a ground source heat pump and they are available as a single grant per property.

Air source heat pumps cost between £3,000 and £18,000 depending on property size and age, while ground source ones are more expensive, ranging from £15,000 to £45,000.

Eligibility for the scheme includes first and second homeowners as well as private landlords within England and Wales.

Participating in the scheme does not exclude landlords from applying for other grands such as separate funding for energy efficiency upgrades including insulation, doors or windows.

The only exclusions are properties that have already had government funding or support for a heat pump or biomass boiler, and those which have ab EPC that has includes a recommendation for loft or cavity wall insulation.

Also, hybrid heat pump systems, for example a combination of a gas boiler and air source heat pump, are not eligible.

A separate grant of £5,000 is also available for biomass builders, but only for rural or off-grid properties.

Landlords must first contact an MCS certified installer who will assess the viability and cost of a heat pump system and then apply on their behalf to have the £5,000 deducted from the cost.

The scheme is being managed by energy sector regulator Ofgem.

Kickstart

Phil Hurley (pictured), Chair of the Heat Pump Association, says: “An upfront financial incentive like this will not just help to kickstart the industry by making the technology more accessible but will also provide heating installers with the confidence boost they need to upskill.

“With the capacity to train 40,000 installers each year, we have made huge strides as an industry to improve the heat pump training pathway, and we are hopeful that this scheme will inspire the workforce to take up the opportunities available.

“Heat pumps represent a readily available and long-term solution to fossil fuel heating and the scheme is a big step towards kickstarting the mass rollout needed to grow the sector and put the UK economy on track to meet Net Zero.”

Find out how to get started.

Read our analysis of heat pump viability.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – BREAKING: Grant scheme for air and ground source heat pumps opens for landlords | LandlordZONE.

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Right to enter an empty leasehold flat in emergency?

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We are a newly formed right to manage company and the remedial works to the block due to the dreadful works by the developer have been huge. We have to recommission the heating system due to the wrong pressure and this needs access to one of the top floor flats.

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3,374 BTL products still on offer to landlords but rates rising

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The Latest Moneyfacts market research indicates that although there was a small month-on-month dip in the number of Buy-to-Let (BTL) products available to landlords, reduced by 61 to 3,374, compared to this time last year, there are over 1,000 more BTL products available now.

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LATEST: Notorious property investment fraudster FINALLY jailed over £600,000 scam

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One of the UK’s most notorious property investment fraudsters has been jailed for six years after a court heard how he swindled investors out of £592,000.

42-year-old father of three John Keats-Ormandy persuaded eight people to invest in his scheme by claiming he had a portfolio of empty properties that needed to be refurbished to fulfil a contract with the Ministry of Defence to supply accommodation.

But it soon became evident that York-based Keats-Ormandy possessed neither and that he had no intention of fulfilling his part of the deal to generate income for his investors.

Several people entrusted their life savings with him and one of the victims was a cancer patient.

The case casts a light once more on the unregulated nature of the property investment sector within which fraudsters and rogue operators are free to make claims about their ‘opportunities’ without being registered, regulated or overseen – unlike most other areas of financial activity.

During the trial Keats-Ormandy’s barrister claimed his had not intended to defraud his victims but had instead ‘got in too deep’.

Proceeds of Crime

The investors are expected to see only £100,000 in total returned to them following a Proceeds of Crime Act hearing later this year.

“It’s great to see justice has prevailed,” says Vanessa Warwick of Property Tribes.

“Keats-Ormandy has been on the community radar at Property Tribes for many years, and we have numerous threads on him concerning the various schemes he has run that have relieved investors of their money.

“In the absence of any formal regulation, community-generated due diligence and warnings are the thin line between consumer protection and financial loss.”

This case follows last month’s news that another fraudster, Sam Eustace, recently stole nearly £7 million from investors.

Pic credit: West Yorkshire Police

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Brighton takes a big step towards rent controls with Secretary of State request

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Brighton and Hove’s Green Party is pushing for rent controls in the city where it’s now the most expensive place to rent outside the capital.

The Green-controlled council, with Labour’s blessing locally, has agreed to write to Michael Gove asking for the go-ahead to introduce controls, or at least to run a pilot testing its impact.

The authority also promised to engage with groups and renters in the city to work on a wider campaign for rent controls, as well as to calculate and publish a living rent for Brighton and Hove based on 30% of median income.

Green councillor Martin Osborne (pictured) says the government’s approach to housing doesn’t give him much confidence that it will respond but has vowed that his party will keep up the pressure. 

Own plans

“We may not get powers to act from government, but we are developing our own plans within our remit,” he says. “We are looking on developing an ethical lettings agency and a Good Landlord scheme. But if we are ever to address the real housing crisis we need significant action from Number 10.”

A recent study by cost-of-living database Numbeo found that Brighton and Hove is the second most expensive city for renters in the UK after London, with tenants needing to spend an average of £1,403 a month.

“Those living and renting in the city have limited spending power,” adds Osborne. “It becomes impossible to save for a deposit; sooner or later renters are forced to move away from the city and often away from their families and friends. Transience and an exodus of families has an impact on everything from community cohesion to school funding.”

Bristol Council and London councils including Brent, Tower Hamlets and Haringey, as well as London Mayor Sadiq Khan, are all campaigning for rent controls.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Brighton takes a big step towards rent controls with Secretary of State request | LandlordZONE.

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The 3 most important things landlords should do when selling rental properties

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The current economic situation has landlords across the UK making the decision to sell their whole property portfolios, or at the very least, downsize. With property market risks, rising interest rates, Section 24 legislations and refurb costs overtaking rent, it seems that the golden era of buy-to-lets is well and truly over.

But with many of us having medium to large-size portfolios full of tenants, what’s the best way to go about this? How do you deal with so many tenants when considering a sale? And what’s the best solution to selling your tenanted buy-to-let portfolio in one go for those of us who want to “stop the financial rot” as fast as possible?

Here at Landlord Sales Agency, we’ve compiled 3 things that all landlords should do to make sure that your buy-to-lets are sold as fast, for the best price, with no issues:

1. Don’t evict your tenants

Contrary to popular belief, the best way to sell a buy-to-let doesn’t require you to evict your tenants. And with eviction notices allowing even longer wait times for tenants to remain in situ, there’s a good reason you’ll want to sell with them still in the property. At Landlord Sales Agency, we have a database of over 30,000 private buyers and investors who are happy to take on whole portfolios with tenants still in the property. This vastly reduces selling time – from what could be a year or more to evict, to just one week, with the new owners happy to take on all your tenants.

2. Pick the right time to sell

It might be tempting to hold on to your rental properties to see if the landlord sector takes a U-turn and helps alleviate our financial burdens, but clinging on to a golden era of the property rental market will inevitably end up costing you more. Experts and associations alike are all in agreement that now is the best time to sell your buy-to-lets, before the market drops. The faster you get started, the faster the properties can be on the market and sold. Unlike estate agents or traditional auctions, at Landlord Sales Agency we have buyers ready and waiting to buy from the moment you contact us. We’re so efficient, most of our portfolios sell in just 28 days or less, and for a whopping 85% – 90% of the market value. A huge bang for your buck from a company who’ll take the whole portfolio off your hands in less than a month. Cash in the bank. No issues.

3. Choose a portfolio exit specialist to get the best price for your portfolio

As frustrating as it can be to want to just “get rid” of the ball and chain of your portfolios, taking the time to find the best people to sell might be obvious, but it’s crucial. There are many companies out there who offer help to landlords, but when you’ve been in the industry for a while, you’ll want the best.

At Landlord Sales Agency, we’re a company run by landlords for landlords. We know first-hand exactly what it takes to get the job done, and for the highest possible price.

Put simply, with us, you won’t even have to worry about the 3 most important things you need to do to sell, we’ll take it all off your hands and solve all your issues in one go:

• We have a database of over 30,000 buyers/investors and we send off-market alerts to those buyers to get properties sold quickest
• We also have vast and strong B2B relationships with other companies who specialise in purchasing portfolios and HMO’s/blocks of flats – this minimises the need for viewings. Many buy without searches or surveys
• We run a modern auction to create competition between our investor database and new buyers and investors we source from Rightmove and Zoopla. We run a bidding war to get the best price in an average of just 28 days
• All purchasers pay 1% deposits (and sometimes buyers fees) and are chain-free and sign agreements to complete in 56 days. This is compared to traditional auctions that charge 10% deposits and have 14-28 day completions. The result is the smaller deposit and slightly longer timescale for completion means our auction achieves the same 95% completion rate as traditional auctions but often at much higher prices as it opens up the auction to those purchasing with finance
• Our company’s culture is driven from the top-down to achieve the best price and fastest completion for sellers, along with the problem solving and drive to overcome every obstacle to get properties over the line. Every single issue is solved, even tenant issues, by working with incredible partners to overcome any barriers that stand in the way.

Here at Landlord Sales Agency, we’re experts in selling portfolios, no matter what the property, in a matter of weeks and even days. Be it as a job-lot, or to several of our many eager buyers ready on our books, we’re getting whole portfolios sold faster than anyone else, and for higher prices than anyone else. What’s more, all you need to do is contact us, and our team of experts will do all the rest.

It’s a bold statement, but it’s exactly what we’ve been doing for hundreds of landlords throughout the UK and we’ve got the reviews to prove it. Be it tenant issues, mortgages, access issues, absolutely nothing is standing in our way from getting landlords like you the highest prices in record times.

So contact us today, and let’s get it done. There’s no doubt about it, there’s never been a better time to sell up and cash in your buy-to-let portfolios than right now.

Contact Landlord Sales Agency:

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Majestic margins? Rents and values surge near Elizabeth Line stations

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Properties around stations on the new Elizabeth line have seen a huge surge in value and rents, according to new Rightmove research.

It reveals that Maryland Station in Newham, which serves commuters near well-connected Stratford, has seen the biggest jump in asking prices, more than doubling from £233,480 to £486,235 compared to ten years ago. The average London property has increased by 55% in the same time.

Twyford, at the end of the western section of the line and the next stop along from better-connected Reading, has seen the biggest jump in the number of buyers contacting estate agents, more than tripling compared to ten years ago (+245%).

It’s a similar story for renters, with Southall seeing the biggest increase in the number of prospective tenants contacting letting agents, more than quadrupling (+372%). Asking rents have increased the most in Slough (+44%) and Burnham (+43%).

Staggering

Custom House, one of the new stations built for the Elizabeth Line, with significantly lower travel times into central London, has seen competition increase by a staggering 33 times (+3,270%) compared to ten years ago.

Tim Bannister (pictured), Rightmove’s director of property science, says many of those areas near stations that are now either better connected, or have seen their journey times into central London significantly slashed, have received a lot of new attention from buyers and renters.

He adds: “Areas further out from central London which have lower asking prices or rents, but are now more easily commutable will be attractive to new buyers and tenants in search of somewhere affordable to live near the capital.

“Not only this, but new working from home patterns will have many people weighing up whether they are prepared to commute from further away if they need to do so less often.”

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British Land returns to profit after three years of substantial losses

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The British Land Co PLC is a real estate (REIT) investment trust owning, managing and developing a portfolio of properties across the United Kingdom.

Specialising in offices, retail and leisure, its strategy now is to leverage its core strengths in property development, active management and re-purposing assets to focus on its two key themes: Campuses – Retail & Fulfilment.

Campus Development is the current term used to describe developments that contains a number of buildings with supporting ancillary uses, operated as a total integrated package with facilities including outdoor space, parking, access, building design, landscaping and design aesthetics.

The company sees its campuses as differentiators, providing high quality, sustainable space, benefiting from “excellent transport connections, an engaging public realm and an authentic sense of community.” The firm’s bets on office-led campuses on the one hand, and retail parks and logistics on the other appear to be paying off for BL.

Employers are increasingly using office space to attract and retain key talent, says the company, so buildings that promote health and productivity are an important part of this approach. BL’s developments and refurbishments aim to incorporate wellbeing principles by design. These include a focus on active design and air quality – a recognition that businesses need to use space efficiently, to balance the need for a personal and collaborative workspace.

BL is also looking beyond its campuses, it says, to invest in local communities with events and activities designed to bring people together and enliven space for everyone who uses it.

Its three London campuses, Broadgate, Regent’s Place and Paddington Central are located in some of London’s growing neighbourhoods and account for around 70.0% of the REIT’s property portfolio. These are well-connected with transport hubs, high build-quality environments aimed at creating work innovation, collaboration and creativity.

Encouraging signs

The return to profit of such a high profile component of the UK commercial property industry, in retail, office and leisure represents a sure sign of optimism, sorely needed as the economy is being battered by a number of headwinds: continuing supply chain and labour shortages, inflation reaching nearly 10%, and significant signs of a slowdown, if not recession.

So far the commercial property market has shown significant signs of recovery following on from the depths of the pandemic lockdowns, as the firm reports a pre-tax profit of £958 million from a loss of GBP1.05 billion last year, and a portfolio recently valued at nearly £7 billion.

BL CEO Simon Carter has said:

“Operationally, our leasing volumes across Campuses and Retail & Fulfilment were the highest in ten years and were ahead of estimated rental value. In London, demand continues to gravitate towards the best, most sustainable space where our Campuses are at a distinct advantage.”

Our “Higher land values mean that returns from London development are more insulated to cost inflation than development in other parts of the country and we anticipate being able to achieve the modest increase in rents needed to offset any further cost inflation above our base case.” he says.

Whilst Retail leasing volumes were strong, the company has prioritised having strong occupancy rates at the expense of rent levels, which were 21% below previous passing rent.

Looking ahead, British Land expects strong demand for its Campus developments to continue, and thinks that “overall market trends are positive.” Construction cost inflation is likely to be between 8% and 10% this year, but BL expects this to moderate to 4% to 5% over the next 18 months.

Further West End developments…

Meanwhile, further welcome signs of optimism return to the London scene: two leading retail and leisure landlords are threatening to create a West End giant, with the proposed merger of Shaftesbury and Capital Counties Properties (Capco).

The two landlords have confirmed they are in merger talks in a deal that would not only bolster their shareholders, the two companies would dominate the hospitality centre at the heart of London.

However, initial reaction from the stock market was negative, with Capco shares down 8 per cent before recovering to 3 per cent down on day one. Shaftesbury’s shares likewise fell 5.5 per cent before recovering to just 2.5 per cent down.

If the merger goes through it will give shareholders in both companies an opportunity to own shares in a much bigger real estate investment trust (REIT), and given the outsider (foreign) interest in companies like this, it could be highly beneficial.

A Stifel analyst, John Cahill says, “If you are bigger, it’s harder for people to take you out because there’s strength in numbers. That said, with some of the overseas capital, their pockets are so deep that they could even take over the expanded company.”

The merged company would have greater cash reserves, giving it the opportunity to expand further and faster. According to Investors Chronicle their latest results show that the two companies have a combined £530mn in cash and cash equivalents in their coffers, yet this firepower might not get them very far in the West End real estate market.

“Assets in the West End don’t come to the market very often, And if they do, there are a lot of people who are prepared to pay very high prices,” says Mr Cahill.

If the deal goes ahead there will be moves for steady hands at the top: Shaftesbury chief executive Brian Bickell is to retire on completion of the deal, while executive directors Simon Quayle and Tom Welton, who have also been with the company for over 30 years, would leave the business.

Despite the similarity between the two companies as West End landlords, Mr Cahill does not believe that the Competition and Markets Authority (CMA) will be against it. “The CMA could get involved. But actually, when you look at what they own, the only overlap is in Covent Garden. The rest of the assets, although they are near each other, don’t particularly overlap. If it did get referred to the CMA, I think ultimately it would be approved.”

[Image – Regent’s Place, London]

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – British Land returns to profit after three years of substantial losses | LandlordZONE.

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