UK Commercial Property Prices May Not Increase This Year

Source : The Business Times, March 13, 2008

UK commercial property prices won't start rising until next year, according to Evans Randall Investment Management Ltd, the co-owner of the Gherkin office tower in London that's started a fund to buy assets in forced sales.

'We will probably look at 2008 as being relatively flat,' chief executive officer Michael Evans said in an interview on Tuesday at the MIPIM real estate conference in Cannes, France. 'A year from now, things will come back with a vengeance.'

Evans Randall, a closely held London-based investment bank, plans to complete a £250 million (S$700 million) acquisition within about a month, Mr Evans said. He wasn't more specific about the transaction.

UK commercial real estate prices fell 7.7 per cent last year, the biggest drop since 1990, according to Investment Property Databank Ltd, as banks curbed lending as a result of the US sub-prime mortgage crisis. Investors also became concerned a slowing British economy would curb demand for offices and crimp consumer spending.

Mr Evans, whose investors paid £452 million for Bank of America Corp's European head office in London's Canary Wharf district in July, said he was still able to finance deals about 80 per cent by debt compared with about 90 per cent before the credit crunch. His lenders include HBOS plc, HSH Nordbank, Bayerische Landesbank and Eurohypo.

Prices will start to recover next year because UK interest rates will be brought down as the economy slows, Mr Evans noted. 'I am still pretty bullish,' he added. 'There is still a big appetite to invest in London and it is coming to the point where it makes sense for investors to buy in London.'

Evans Randall has bought £300 million of assets in three transactions for its £1 billion fund.

That includes its first acquisition in London's West End, home to the world's most expensive offices, as well as Commerzbank AG's London head office. -- Bloomberg