Pictured above: Edwin Bray of Drivers Jonas
Drivers Jonas hosted its annual investment seminar in Birmingham
last week - a prognostic view of what's in store for the investment
market in 2010. Regional Head of Professional Services Edwin
Bray, together with National Investment Partner Howard Richards,
led an innovative session to 80 investors and lenders alongside the
Drivers Jonas Birmingham team and guest speaker Stuart Kelly of the
Bank of England.
Key points included:
• Plenty of money chasing UK
property
• More stock to be available in
2010
• More banks will be lending -
margins to reduce as a result
• Amortisation and LTV to
remain in focus
• Weak but positive economic
growth expected
• Interest rates to remain
flat
• Threat of increasing bond
yields could dampen capital value growth
• Rental growth to be patchy
with focus on key retail centres and Central London offices
• Key sectors for investment:
London offices, prime town centre shops and Cathedral cities, open
consent out-of-town retail and London industrial
Where to invest?
DJ emphasised that there is plenty of money chasing UK property
from both UK institutions and property companies as well as
international investors.
Richards noted economists are expecting a modest return to
positive economic growth and expected interest rates to remain
flat. DJ expected more stock would become available in 2010
from funds rebalancing, banks pushing through sales in the improved
market conditions and profit taking by shrewd 2009 buyers.
The public sector will be under pressure to produce capital
receipts, and in particular local authority asset backed vehicles
will attract interest.
Richards said: "Property has re-established itself as a favoured
asset class and there is a significant weight of capital
overhanging the market from both UK institutions and property
companies trying to buy good property in just about all sectors as
well as a range of overseas investors keen on London offices.
This weight of money will see further growth in capital
values in the first half of the year.
"The election may mean some investors will take stock, but
attractive running yields and the medium term prospect of rental
growth returning in some markets suggests to us a solid year for UK
commercial property and the likelihood of total returns of 10%
after two difficult years for the sector."
Richards warned the threat of increasing bond yields could
dampen capital value growth. But positively it was felt that
more new active lenders will emerge during the year and the
increased competition could lead to a 50 basis point margin
reduction.
DJ likened the search for rental growth as a maze in the weak
economic growth expected, with plenty of pitfalls and dead-ends,
but also highlighted that some sectors are poised for growth due to
tightening supply and the unprecedented lack of construction
activity.
Anthony Duggan, Partner and Head of Research, said: "With
economic growth positive but weak and the expectations of only
modest growth in consumer spending, the outlook for the occupier
markets remains muted. The key to rental growth in 2010 will
be identifying locations with supply constraints."
Commenting on the investment market in Birmingham, Edwin Bray,
Regional Head of Professional Services said: "We have seen
considerably more activity in the prime investment market with some
very significant deals in Birmingham such as the recent sale of One
Snow Hill and 2 St Philips Place. Yield compression has
helped to push values on prime property beyond many forecasts and
the competition between private investors coupled with the return
of the Funds has helped to drive up demand. There are many
examples of profit taking over the last year.
"Looking ahead, we believe the appetite for prime stock will be
sustained, however the impact of the banks releasing secondary and
tertiary properties into the market will probably widen the gap and
emphasise the two tier market."