This week one of my long-held beliefs has been shattered.
Shortly after I began writing about this business 23 years ago, I realised it didn’t matter what you asked an estate agent, their response would always be something like: “It’s really busy out there - lots to do, lots of positive things to look forward to.”
I could ask, for example, a City letting agent how occupier demand was in the teeth of the late-90s recession when the dotcom bubble burst. He would come back with: “There are some great tenants out there and we’re working to find many of them some great space. This dotcom problem thing is overblown.”
In my experience, you lot are a hopelessly optimistic bunch. If a meteor were one week out from hitting the planet and destroying all life on it, property people would say: “Let’s not exaggerate the effect of an extinction-level event. In the past few weeks, we’ve seen a huge uplift in demand in some areas of the market.
“For example, the value of shelters deep underground and storage for long-dated food has rocketed. Indeed, meteor shelters have become so popular, we believe they should no longer be considered niche, but a mainstream sector.”
Given your upbeat tendency, it was with some surprise that I read a couple of surveys this week that showed the industry may not be as gung-ho as I had believed. Maybe Brexit was the meteor you didn’t feel you could dodge.
First, there was the RICS’ latest commercial property market survey, showing that more than a third of respondents feel the market is now in the early stages of a downturn. While a year ago I could not find anyone other than Jefferies International’s Mike Prew to call the top of the market, now 36% of you believe we’re in a downturn.
And it’s not just the RICS that’s had a reality check. Lambert Smith Hampton’s latest research also paints a bleak picture, with UK commercial property transaction volumes in the second quarter down a whopping 45% on the same period last year.
However, there are still pockets of hope. Wells Fargo’s £300m purchase of a City office for its new HQ runs contrary to all the doom and gloom about foreign banks wanting to flee the capital because of Brexit.
Also, there are signs of retail investors starting to put money back into the property funds that continued trading during the recent turmoil, and the consensus is that there is little danger that institutional funds will suffer the same sort of issues as their retail equivalents.
But the bad news still far outweighs the good. It may not be 2008 all over again. A collapse in values is unlikely. Money has never been cheaper and property is well funded. But if there are few forced sellers, where will the deals come from? Anyone thinking of selling will surely just sit on their hands. A very slow market is in prospect and that’ll hurt agents more than investors.