'Profound And Permanent Changes Underway In UK Real Estate' Warns JLT Event
11th May, London: Profound and probably permanent changes are underway in the UK real estate market as a result of the financial crisis and the shift in shopping habits created by the internet , leading to the demise of the High Street in its current form. This is the conclusion of a real estate seminar held recently in the House of Commons organised by the City Property Association (CPA) and sponsored by the insurance broker JLT Specialty Limited.
 
The speakers were Mark Field, MP for the Cities of London and Westminster who hosted the event; Paul Morrell, the Government’s Chief Construction Advisor and Professor Barry Gilbertson, property insolvency expert and independent consultant.
 
These changes are likely to bring with them great uncertainty but also opportunity for real estate companies, according to Anthony Furlong, President of the CPA.
 
Among the paradigm shifts noted by the speakers:
 
    • Banks may soon have to sell many of the distressed properties they have been trying to manage since the financial crisis began, because their value is falling and they cannot make up the difference. There will be opportunities to strengthen buy to let portfolios.
 
    • Britain’s High Streets will never be the same again. They are contracting as shopping shifts to the internet with online sales likely to double again in the next two years. Fringe properties, many of which are not in good condition, may transfer to residential use, possibly for sheltered housing, and remain so. Again, there are possibilities here for developers.
 
    • However, real estate is likely to remain under pressure because of the level of equity funding needed for projects. At such low interest rates, banks are extremely risk averse and equity to debt funding ratios are at some of the lowest levels the market has ever seen with banks willing to lend no more than 70 percent, generally less.
       
    • As the largest buyer of construction services in the country, the Government is starting to act like a single client in its relationship with the industry. It is, for example, examining why in one district schools built under the same programme cost £1,400 per square metre and £4,000 in another.
    • The North-South divide is widening. While prices in the City of London are buoyant, many town centres in the north of England and suburban areas are unlikely to see regeneration for many years. 

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Terence Edwards, Partner, JLT Specialty Limited concludes, “In a period of profound change in any market, the risks are heightened but so too are the opportunities. Our aim is to help commercial property owners and managers exploit the opportunities by reducing their exposure to uncertainty, particularly in terms of operational risks.”

     
   
 
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