Posts with tag: increasing rents

Office space in London commanding record rents

Published On: May 15, 2015 at 10:20 am

Tags: central London rents,increasing rents,office rents

The record-breaking central London office rents show no sign of slowing down. As such, one of the UK’s largest landlords has posted a substantial rise in the value of its properties, alongside a huge rise in net asset share.

Rising returns

British Land posted a 12.1% increase in the total value of its portfolio, with a 20.5% increase in net asset per share. This took the overall value of the company’s portfolio to a £13.6bn, with much of the growth attributed to offices during the past year.

The organisation completed and opened its signature Cheesegrater tower in the summer of last year and how now successfully rented out 84% of the structure’s 47 floors. One group, Affinity Shipping, is paying British Land £90 per square foot of space, thought to be a record-breaking amount.

This record amount is a signal that space in the capital is an increasing premium. According to a recent survey from Knight Frank, the cost of an office space within a London skyscraper grew by 7.7% over the last year, meaning that it became the fourth most-expensive city in the world for high-rise rents.[1]

Office space in London commanding record rents

More to come

Chief executive of British Land, Chris Grigg, said that the Cheesegrater tower was just one of a number of proposed developments in the capital. Grigg said that, ‘we have got other irons in the fire. We are happy to continue to develop, but we don’t happen to have a tower project at the moment, particularly given the price of land.’[2]

Grigg feels that the outcome of the election, nor the impending EU referdum, has not put the brakes on demand for central London office space, stating, ‘do I think it’s having an impact on the market at the moment? No, but could that change? Of course.’[3]

British Land recently paid £135m to secure the remaining land on a 46-acre regeneration plot at the site formerly owned by Canada Water. The firm hopes to construct a town centre on the site, complete with shops, offices and homes. Additionally, British Land juggled its existing portfolio, selling off more than £900m worth of assets. This included a property swap deal with Tesco that enabled the company to refocus its supermarket holdings in the South of England.

It was not all good news. The company lost out to Land Securities in their attempt to secure a stake in Bluewater shopping centre last summer. Grigg however was bullish in his response to losing out on the investment, as he felt the £656m paid was too much. Grigg said, ‘we were happy to miss it at that price to be clear. That’s the nature of our business, we need to have capital discipline.’[4]

With underlying pre-tax profits rising 5.4% to £313m over the last year, it seems that British Land can afford to lose out on the occasional deal.

[1-4] http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/11605781/Office-space-race-in-London-sends-British-Land-to-greater-heights.html

Homeowners Better off than Renters

Published On: September 19, 2012 at 11:23 am

Author: Em Morley

Categories: Finance News

Tags: cost of buying decrease,increasing rents

A continued decrease in the cost of buying property, coupled with increasing rent prices has seen the gap between purchasing and renting widen during the last twelve months.

Falling mortgage rates have seen the cost of buying fall a huge 43% in the past four years.[1] Furthermore, the average mortgage rate for a first-time borrower dropped from 5.91% in June 2008 to 3.82% in June 2012.[1] Property prices have seen a similar decline, falling by 10% over the same period.

Homeowners Better off than Renters

By contrast, the average rent price has risen by 11% since 2010.[1]

Encouragement

Martin Ellis, housing economist at Halifax, was encouraged by the figures. Ellis said: “It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008. The improvement is due to a combination of lower mortgage rates and declining house prices.”[1]

Ellis also mentioned the tough times for the rental market: “Market conditions for renters have deteriorated as rents have risen in the past two years.”[1]

Stumbling block

Despite affordability improving, the number of buyers in the market has dropped, with large deposits blamed for the decline. A survey from the Halifax showed that 58% of respondents said that raising enough for a deposit was the biggest barrier to becoming a homeowner.[1] Over the previous four years, the number of buyers fell from 793,600 to 535,200.[1]

Ellis is concerned about the housing market at present but suggests there could be prosperous times ahead. He said: “Despite the improvement in buyer affordability, the housing market nationally continues to tread water. Those getting on the housing ladder still face challenges, most notably in getting a deposit and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, it is worth noting that once homebuyers are on the first rung, their monthly costs are notably lower.”[1]

[1] http://www.landlordexpert.co.uk/2012/09/19/falling-mortgage-costs-and-soaring-rents-have-left-homeowners-better-off-than-those-renting/

Predictions and Forecasts for the Rental Market

Published On: August 31, 2012 at 5:14 pm

Author: Em Morley

Categories: Finance News

Tags: house price rises,increasing rents,rental market predictions

Recent reports have provided extremely welcome reading for buy-to-let investors. Indications suggest that due to increasing rents, recovering property prices and low interest rates, investors can expect profitable returns on their investment during the next 13 years.

Just what does the future hold for the buy-to-let sector?

Rent hike

Statistics from the Royal Institute of Chartered Surveyors (RICS) indicate that rental prices have risen by 4.3% over the previous 12 months.[1] RICS believe that this is due to the fact that mortgages for potential homeowners are still difficult to achieve.

In addition, RICS predict a 3.9% increase in rent prices over the next year, believing that demand for rental accommodation will climb, with supply remaining even.[1]

Indications also suggest a regional differentiation in rent prices. For example, rental prices rose by almost 7% within the North West of England during the last 12 months.

Predictions and Forecasts for the Rental Market

Rental price hikes are worrying a number of industry figures. Peter Bolton King, Global Residential Director at RICS stated: “While tenant interest is still riding high, what remains to be seen is whether many are willing to meet the increasing rents being demanded by landlords.”[1]

Bolton King went on to say: “It is clear we have seen rents grow steadily right across the UK for some time. This is partly down to the problem of the scarcity of mortgage finance and the large deposits required by lenders.”[1]

Future estimates

Industry forecasts for the future of rental and property markets predict a 2% increase in house prices until the year 2025. Forecasters suggest that there will be a marked shortage in supply of privately rented accommodation, when demand returns to its pre-recession level at the back end of this decade.[1]

It does however seem to be the premium time for landlords to extend their existing portfolios. With house prices rising, landlords able to extend in the present climate could reap the rewards in future years.

However, John Hawskworth, Chief Economist with PricewaterhouseCoopers, urges caution: “Housing is a potentially risky asset as recent experience makes all too clear.”[1]

[1] http://www.landlordexpert.co.uk/2012/08/31/the-rental-market-predictions-and-forecasts/