DTZ Head Sees UK Property Readjustment

Source : The Business Times, December 20, 2007

(LONDON) The British real estate industry is in danger of talking up a deeper market correction than is warranted, Robert Peto, chairman of property services firm DTZ said on Tuesday.

'Clearly, we are in the middle of a massive readjustment,' Mr Peto said, referring to a record 4 per cent slump in commercial property capital values in November. 'But the unusually swift speed of this means we will reach a clearing price for UK commercial property much more quickly, and the recovery can begin,' he said.

The property market veteran told Reuters in an interview that valuers were re-rating the asset class at a surprising pace and those revaluations had already whetted the investment appetite of equity-rich sovereign investors and pension funds poised to re-enter the market.

'The sharp correction is a good thing and increases probability of a 5-6-month downturn, instead of a 5-6-year one,' said Mr Peto.

He said positive market fundamentals such as strong tenant demand had also been overlooked, since the real estate investment market went into hibernation because the industry tended to exaggerate weakness in times of market stress.

Mr Peto also said talk of a hefty spike in property industry redundancies in 2008 was premature. 'DTZ has not made any forecasts on reduction in head counts across the industry, because our experience is that when you start making those sorts of predictions, they precipitate,' he said.

'We need to be cognisant that we're accelerating very quickly towards that clearing price and it's far too early to say jobs will need to be cut,' said Mr Peto. -- Reuters