Commercial Property Blog
All posts from: August 2012
Underwater, Mouth Watering or Sea Change?
In 2012, the market may well resemble a black and white movie - things will be in stark contrast, with few shades of grey. Equally, there will be success or failure, but again, little in between. There will also be opportunity, as that is what markets like this bring.
For example, extremes have been amplified in the last few weeks with Battersea Power Station being placed in administration and at the other end of the spectrum, a possible sale of Deutsche Asset Management. The Power Station has been plagued with bad luck or some may say failure, but both the Power Station and Deutsche offer great opportunity.
In a retail context, the gap in the market will increasingly widen between assets which are under water, and those which may be described as mouth watering. The former asset class warrant a significant valuation correction and that is likely to be further manifested this year. This may well prove to be the lifeline these assets need to create a lower valuation benchmark to re-engineer the occupational platform to a sustainable and profitable level.
In practice however, are we really talking about something more akin to a sea change? Increased online activity, a 10 year development boom, a bloated lease expiry pattern coupled with constrained consumer spending is likely to lead in 2012 to a reduction in the amount of floor space acquired by occupiers. Market intelligence therefore on the depth of occupational interest and the specific space requirements of occupiers has never been more important or valuable, and this is one of the commodities agents bring to the party.
In 2012, there will be a real need for quality active asset management and one of my expectations for the year is that particularly in the secondary market previous sacred cows will be challenged and probably overthrown. This will extend to a reduction in rental level, reduced lease length and revised rent review structures. If a common agenda can be found between owners and occupiers, then the opportunity which in some instances will exist within the secondary market can be capitalised upon, so that assets may slowly rise from under water.
In conclusion, the expectation for 2012 is that the market will continue to polarise, the term sink or swim being never more evident. My anticipation is for a sea change in many parts of the real estate market and how assets are ranked. The art is to be organised to seize upon these opportunities. I for one am looking forward to 2012 and beyond.
The idea of quotas to address the imbalance of women on boards of directors, where a number – say a third – of all members on a board would have to be female, misses the point.
Those for the quota system argue that at the current rate of change, it will take more than 70 years to achieve gender-balanced boardrooms in the UK. If they are right I may just make it in my 90s. But this doesn’t change the fact that quotas are a quick, lazy and ineffective fix to an issue that can never change overnight.
The fact is the current statistics for women breaking through the glass ceiling in UK businesses are appalling. And, even in the context of bad statistics, the property industry is still lagging behind. Less than a quarter of those nominated for Property Week’s Hot 100 list of the top people to watch under the age of 35 were women. Are there really not more bright, young female stars out there?
Property companies I talk to say it’s not their fault. They complain again and again that the female talent is not coming through and they have no option but to appoint men in top positions.
I have no stats to back it up but HR directors tell me once a woman takes maternity leave, they very often decline to return. Or if they do return, they are unable to or don’t feel they have the capacity to climb to the top – I mean, we can’t all be Karren Brady or new pregnant Yahoo CEO Marissa Mayer and return to work two weeks after giving birth.
But motherhood is not the death of a career and industries such as property need to tackle the issue once and for all.
It isn’t rocket science. A bit of digging around HR policies reveals that some companies have tried to address the issue with ideas such as return to work bonuses, whereby if a woman returns from maternity leave and remains in employment for longer than six months, she receives a bonus. This encouragement to stay in work may be all women need to realise they still love their job, their baby can survive without them and leave them free to progress up the career ladder.
Flexible working is the other obvious point. If the London 2012 Olympics has shown us one thing, it is that people can work from home, or work with staggered start times and the job still gets done, with the impact on employee or business performance being, at most, nominal.
Then I thought about these solutions some more and I realised the other problem – the one we probably don’t want to admit, as women. Companies can introduce every child-friendly policy under the sun, encourage women to return the work or apply for a promotion all day long. But when it comes down to it, only the individuals themselves can have the ambition and drive to break the glass ceiling.
I am a firm believer that if women want to be promoted to boardroom level, they have to push themselves to the top of the pile. They need to shout about it, make it known they are better than (or at least equal to – start small for now…) the man sitting opposite them, and say it out loud: I should be the next CEO of the company. I don’t want well-meaning but silly, damaging quotas doing the job for me. Who knows, maybe I wont have to wait until I’m 90 for it to happen after all.
Property firms should especially encourage their entire new intake of graduates starting next week to work towards this. They should ultimately be grooming them to be the next CEOs of the firm and make them work hard for success. No one ever complained of there being too many good CEO candidates, did they?
When the suits from investment companies and their stuffy mates say they have been talking about the need for more investment into the private rented sector (PRS) for a long time, I draw a deep breath.
Don’t I know it. Well over five years. Talking, that is. While nothing happens.
When I first tackled the subject in Property Week in October 2007, I had already given evidence to a Parliamentary Select Committee on PRS and written a tediously large number of articles which fell on universally deaf ears.
In that article I made the following suggestions as to how developers could make it happen.
- Find a site. Negotiate a planning permission based on all the flats being to let, with a covenant strictly restricting the use to renting for 25, 50 or 100 years.
- Suggest to the council that this would result in lower market rents, effectively creating affordable housing for key workers without any public subsidy, provided the following conditions are met:
- Negotiate removal of the ‘affordable homes’ quota, on the basis that the rented flats will be affordable anyway.
If you cross check this with the Montague Review (to which I was not, btw, even asked to contribute) you will find that some of the recommendation might have been separated at birth.
Am I cheered, then? Well, not really. In my experience these reports come and go and they might as well be talking of Michaelangelo. The main reason investors consider PRS to be a high-risk proposition (when it is the major housing provider in many Western countries) is not financial but political.
While politician of ALL credible parties worship at the altar of home ownership and refuse to deviate from it in the name of “aspirations”, PRS will go nowhere. This is not, however, a counsel of despair. If the cycle can be broken by cracking the egg, politicians may be persuaded.
But the initiative MUST come from the private sector and be led by it profitably, to avoid PRS falling back on cosy old public sector subsidies. And this of all governments must at the very least give the fledgling sector the illusion of being loved. Because otherwise, we will be having this conversation all over again in 2017 and 2022. But our children will have nowhere to live.
By Mira Bar-Hillel
When a friend of mine Michael de Massey suggested that I join him on a 2,400 mile round trip from Manchester to Slovenia it seemed only sensible to suggest adding a further 600 miles by taking in the Mosel-Saar-Ruwer and Alsace on route.
A Ford Transit would not have been my first choice of vehicle but as Michael had arranged to collect 60 cases of Slovenian wine in Ljubljana there was little alternative.
The German leg involved visits kindly arranged by Justerini & Brooks to Willi Schaefer in the village of Graach, close to Bernkastel-Kues; Maximin Grünhaus estate of Carl von Schubert close to the junction of the Ruwer and the Mosel rivers; and Zilliken in the Saar. The French leg took in Domaine Weinbach and the famous Trimbach estate in Ribeauvillé.
Mosel-Saar-Ruwer and Alsace are best known for single varietal Riesling ranging in style from bone dry (6g of sugar/litre) through to extremely sweet German Trockenbeerenauslese (360g/litre); however, irrespective of style the overall outcome of our tastings might be summarised as being a case of ‘Germany 1 France 0’. There can be no doubt that German Riesling is, with few exceptions, superior in terms of quality to its French rival and cheaper in terms of price.
As much as I enjoy a glass of Riesling there is a limit and so the final evening of the trip was spent at the superb Michelin-starred restaurant JY’s in Colmar with a glass of red in hand and a 6 course tasting menu to follow (€78).
The first wine Savigny Les Beaune, Vielles Vignes, Nicolas Potel 2008 (€60) was disappointing: spent match nose with cherry; light fruit with strawberry like flavours; short finish; overall quite simple.
The second wine Lynch Bages 2007 (€175) was far better. Michael’s notes were more detailed than my own: ‘Deep colour with a small ruby rim. The nose is concentrated blackcurrant, liquorice and cedar with immense purity and freshness. The mouth feel is tight and concentrated. The tannins sit very close to the acidity and it has a peppery finish. As it opens up there are chocolaty notes on the nose. Overall the acidity is very upfront however on balance it is a satisfying wine.’
Jean-Yves’s food capped off a fantastic whistle stop European tour perfectly. More on the Slovenian leg to follow after a comprehensive tasting of the cargo…