Commercial Property Blog
All posts from: July 2012
Following redundancies at firms such as Linklaters and Herbert Smith, many real estate lawyers are convinced that large, ‘magic circle’ firms in particular are refocusing their energy and resources on large, corporate transactions for huge global clients like the pharmaceutical giants, at the expense of everyday ‘pure’ property law work such as leasing and conveyancing.
If real estate is still a core area for them, there tends to be a focus on the high profile ‘trophy’ deals and developments that enable them to use a mix of skills from different practice areas, including banking, finance and restructuring.
As Adrian Levy, global head of real estate at Clifford Chance, said: “There has been a move away from traditional property areas such as leasing towards large, complex transactions”.
And Hugh Lumby, real estate partner at Ashurst, told us: “The ‘magic circle’ appears to be moving away from real estate and making it into more of a support-type role. These firms are striving for ever-greater deals and increasingly focussing their attention on banks, sovereign wealth funds and a small number of key developers.”
If this trend continues, there will be more space in the market for the smaller, niche property law firms to grow. Goodwin Proctor is growing its real estate team to try and step into this space, its head of real estate David Evans told us, while Berwin Leighton Paisner (though not small) has added three new recruits to its real estate team in recent months and is undertaking a massive drive to rebrand itself as the real estate law firm.
However, just last month Property Week reported that Britain’s biggest retail landlords – including Land Securities, Westfield and Prupim – have instructed lawyers from Hogan Lovells and CMS Cameron McKenna to draw up a simplified, standard lease for tenants (news, 29 June). While helpful to retailers, if such a lease is rolled out across all of the UK’s largest shopping centres, as intended, this will further reduce the need for real estate practices to draw up tailored leases and provide such traditional landlord-tenant support.
Whether this lease will be adopted by many though, or even drawn up in the end, remains to be seen….
But I was interested to see that the gist of recommendations laid out by BNP Paribas Real Estate and its expert panel in its Housing the Nation report was that it’s down to government - of both the local and national varieties - to ensure more housing is delivered. As panelists pointed out at the report’s launch last night, it’s the responsibility of local authorities to make sure their residents are housed.
Can the crisis be solved simply by our esteemed leaders in Westminster taking steps to sort things out? I’m not convinced.
Take mortgage lending, for example. BNP PR recommended that “more government-backed mortgages” along the lines of the NewBuy scheme (which provides first-time buyers with government-guaranteed 95% mortgages) are needed if we are to ease “prohibitive deposit levels and lending criteria”. Increasing demand would - as basic economics states - take huge steps towards increasing supply.
But so far, NewBuy has yet to achieve anything like the 100,000 completions it was hoped. In fact, three months after its launch, figures by Canaccord Genuity suggested the grand total was more like - er, five. That was largely down to an average lending rate of 5-6% - not the kind of rate a first-time buyer wants to be saddled with.
In exactly the same way the government’s desperately tried to increase banks’ lending to businesses by persuading them to sign up to lending targets which they then flagrantly ignored, banks have drawn the line when it comes to government-backed lending to first-time buyers. The message is, you can’t ask us to lend to customers we can’t be sure will pay us back at the same time as asking us to boost the capital we hold.
Unfortunately for us first-time buyers, that means the government will continue to look pretty helpless when it comes to trying to increase the number of housing completions back up to pre-2009 levels. Ah well. Perhaps things will be different for our grandchilden…
One of the few rock’n’roll heritage sites not ripped from the cultural spleen of the West End by the rupturing menace of Crossrail, the nuisance of relentless rickshaws or Westminster Council’s brutal licensing regime is the 100 Club. Nestled beneath an unsuspecting 1960s office block and wedged between two anonymous shops (ones with constant 70% discounts), it witnessed an unlikely gathering of some of the City’s most senior lawyers a couple of weeks ago.
Luckily, they weren’t there to take occupancy, but were committing another crime: murder. Of the musical kind: many great songs died that night as part of the Law Rocks charity event. Like Party Near the Park without the drag.
Property folk will be pleased to learn that Hogan Lovells were one of the better acts there. Fronted by the Fender-baiting frontman, Matthew Ditchburn, who’s slightly reminiscent of Tim Wheeler (from Irish band Ash, rather than the now-defunct Brixton group), who led them through a set of nineties/noughties hits.
Needless to say, the world of Green Day is a universe away from Quarter Day and Ditchburn’s normal role helping the major Reits and pension funds patch up their retail portfolios with CVAs and pre-packs. And while the insolvency and restructuing partner no doubt secretly possesses a carefully curtained hope of being the opening act when they eventually re-commission Top of the Pops, he’s become one of the leading spokesmen in the industry’s fight with failing retailers.
Which takes us nicely to the front page of the current issue of Property Week, reporting that the major landlords have finally agreed a much-talked up standardised lease. Coming three years after Land Securities launched its own Clearlet, it has always made sense to simplify the process. And while many still see the property industry as exceling in being stuffy, conservative and unwilling to shift, I’ve been privileged to see first hand how firms have evolved through innovation at the top.
The Reits and pension funds will of course fear more than a few extra hours of legal fees will be the recurring threat of an upward-only rent review ban. Mary Portas, following her “review” for the government (which seems to have doubled up a rather lucrative commercial deal for TV shows and publicity), seems to be blundering towards the very point if reports are to be believed.
Clearly, no amount of deckchair shuffling with shorter leases is going to stop deserting the likes of Clintons, Game or Peacocks. And with the continuing dominance of Land Securities, Westfield and British Land in prime retail, the divide between primary and everything else will only widen over the coming months, becoming a self-perpetuating spiral for unloved retail space.
The threat of a ban on upward-only rents would exacerbate the situation, meaning more landlords across the industry need to pull their socks up and try and future proof their tenants, and themselves. Whether that’s through clearer leases, monthly rents or donuts on a Friday morning remains to be seen.
Maybe what we need is a 100 Club on every British high street?