D 007AY 3 EARLY EXITS WARNING SOPHIA FURBER
Structural changes in the public sector and the retail market in particular mean that even good quality borrowers could be seriously affected by early exits from leases. That was the view of a panel of experts speaking at a debate about finding value beyond prime
locations and sectors at MIPIM UK on Thursday. “We need to be thoughtful about what types of real estate will be needed in the regional
economy in future,” John Feeney, head of global real estate at Lloyds Banking Group, told the audience. “The public sector has been a very inefficient user of space and is now starting to retrench. Retail is changing rapidly too. I would have reservations about lending against a regional property with a department store on a long lease. Will it still be there in five years?” According to IPD figures, 43% of shopping centre retail leases and 37% of all high street shop
leases are due to expire by the end of 2015, leaving potentially large swathes of the UK empty. Despite Feeney’s warning, panellists reported good levels of interest from both traditional and
alternative lenders in regional markets. “I’m not going to pretend it’s like London, but we are seeing a lot of interest from both foreign and domestic lenders, particularly in alternative assets, such as student housing, which have an income stream,” said Helen Corner, partner at law firm DWF in Manchester.
STUDENTS NOT SO ALTERNATIVE
As almost £1bn of student accommodation assets came to market this week, attendees at MIPIM UK debated whether the sector could still be considered alternative. According to Nick Collins, partner at law
firm Nabarro, the student accommodation sector has grown from 1,224 beds in 1974 to more than 130,000 beds now. Investment in the sector has topped £5bn, he said, with some 27 operators active in the market. This week, Knightsbridge Student Housing
instructed JLL to sell a £450m portfolio of close to 6,000 beds, while Carlyle Group is looking to
offload a £500m portfolio of 2,150 beds. Rob Martin, head of performance analysis
and research at Legal & General Property, said the student sector was now roughly the same size as the retail warehouse sector, which was not considered “alternative”. He said that while the yield from student
accommodation is 5% to 6%, the rental growth expectations are 3% to 3.5% pa. But Collins warned that there was “no room
for complacency” in the student sector as while facilities in the UK were world-class, there was intense competition from other countries.
MIPIM TWEETS
Solent LEP @solentlep Savills says there has been a 25% increase in demand in the office market for the South East since 2013 but take up is low #MIPIMUK
BPF @BritProp Private sector requirements to buy govt estate? @LizPeaceBPF: disciplined timetable, coherence, no skeletons! #MIPIMUK
steve batstone @batstone_steve Great vision laid out at the Cardiff showcase. £6bn investment in next 3-5 years!! #MIPIMUK @WSP_UK
Robert Gordon Clark @ rgclondoncomms Lord Carter on behalf of the Cabinet Office says government properties in London will reduce from 143 to 23 by 2020 #MIPIMUK
Leanne Tritton @leannetritton What I learnt at #MIPIMUK. LandSec’s Robert Noel won’t do spec development outside London, but has a tattoo on his butt
Caro Communications @carocomms “With careful masterplanning there’s no reason hospitals can’t lead urban redevelopment from the outset” – David Lewis @NBBJDesign #MIPIMUK
DofE gold award holder Spencer Aston addresses delegates
Left to right: Tony Rose, Michael Samuelian, Martin Perry and Sue Bruce discuss 21st century cities with EG editor and host Damian Wild
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