The dark side of the boom

On the one hand, you’ve got the likes of Bruce Ritchie’s Residential Land preparing a £650m push into prime central London and so called “buy-to-leave” foreign investors snapping up luxury new builds off-plan.

And on the other, there is the housing crisis - already a key election battleground and, of course, intrinsically linked in London to the prime residential story in that the more demand for prime there is, the more lower-paid ‘locals’ are pushed out and the more developers plump for the minimum possible ratio of affordable. (The counter to this is that without prime residential, we might not have affordable).

The stark truth is that more housing of all types is needed, says Grosvenor’s Peter Vernon . And he believes he has the answer: bolster the PRS by removing “the dead hand of planning” and offering developers a clearer proposition - pre-determined and reduced section 106 requirements in exchange for a covenant committing to PRS for 20 years, for instance.

The PRS surely has to play a part (interestingly, Ritchie also announced this week one of the largest ever refinancing deals in the UK PRS). But first you have to have the affordable houses to rent - or sell, for that matter.

Debate is already intensifying around the potential use of green belt land and last week saw London mayor Boris Johnson unveil the capital’s first designated housing zones in a bid to do for residential what enterprise zones have done for businesses. As we report in our analysis of the nine zones, they are hoping to deliver 28,000 homes by 2025.

Whether they do or not, it won’t detract from the fact that parts of central London already appear to have moved permanently beyond the reach of even fairly affluent workers… and, it seems, luxury retailers. The fortunes of the luxury market are just one of the areas explored in this week’s special report on the retail, hotels & leisure market. There is also a fascinating piece on how bricks-and-mortar retailers are increasingly harnessing technology to drive sales. Don’t fear ecommerce, is the message, embrace it.

It is certainly a strategy that has paid off for SEGRO. This week marked the end of David Sleath’s three-year turnaround plan to refocus the business on ecommerce-based distribution. Oriel’s Alan Carter, for one, is impressed with its achievements, not least its record low vacancy rate of 6.3%. Indeed, he goes so far as to say its portfolio is in the best shape of its 96-year history. “As the market continues to seek yield and income, logistics and distribution space ticks all the boxes, and wrapped in an efficient corporate structure, then all the more so,” he contends.

The business is on such a roll that it looked to buy joint venture partner Roxhill last year. Although those plans fell through, don’t be surprised if it does acquire something, sooner rather than later. If further proof were needed that 2015 is going to be a year of mergers and acquisitions, this week saw not one but two significant deals touted. The first we’ve been on the trail of for weeks: the likely takeover of GM Real Estate by Colliers International. Meanwhile, Cushman & Wakefield has put itself up for sale with a price tag of £1.3bn. Tellingly, it’s looking for a private buyer, presumably to remain master of its own destiny - and possibly someone else’s - rather than becoming subject to a takeover bid itself.