The summer may have been a wash out, but Peter Clarke, King
Sturges' valuations partner says there is a ray of sunshine in the
lending market if only there was more product.
"We are seeing more new lending coming through from the banks
than we were three, four months ago and probably we would see more
if it wasn't for a lack of sales in the commercial property
market.
"This is partly caused by the banks themselves. Having been
burnt, seizing assets on breeches of loan to value covenants, and
finding they are left with a property worth less than the debt,
plus mounting holding costs, they are choosing not to pull the rug
on lenders so readily. Instead, they are deciding they are much
better off riding with the borrower. Therefore, the supply of
product being released to the market has slowed down.
"There has also been a sea change," says Peter "We are now
considered to be past the bottom of the commercial property
market for prime property with some prime yield compression
being experienced and prices going up at auctions, so buyers are
now back with the money. This was recently demonstrated with Max
Property investing £245 million into a distressed commercial
property portfolio. On the whole though vendors don't want to
sell.
"Institutions and property owners are holding onto solid assets
and those with the money only want to buy product with secure
bullet proof income on long occupational leases. So there is a
weight of money chasing very few opportunities."
Peter Clarke considers part of the answer to be the Commercial
Mortgage Backed Securitisation' (CMBS) market which will start to
mature at the end of this year. As the name suggests CMBS's are
when a group of investors lend money to a borrower overseen by one
overall lender.
"Pre credit crunch CMBS's were seen as the panacea of the
commercial mortgage market," says Peter "But having a closed life
span, many are finishing at the end of this year and due to their
complexity it is unlikely they will be refinanced. Properties
subject to them may well be taken to market, creating an influx of
product.
Peter added "another source of stock may come from the troubled
Irish Banks, where NAMA (Irish Government's National Asset
Management Agency) is predicted to commence asset sales in
2010".
"An increase of product combined with the weight of money around
will start to drive the market." And Peter believes this will
allow us to see a break in the clouds for 2010.