The start of 2012 would appear gloomy for property investors – the worldwide economic outlook remains bleak, the stability of the gulf region is in question, the Eurozone debts crisis continues to endanger our entire financial system and even China, the ‘engine of the World’ has started to misfire. So it is no wonder that investors and businesses are hoarding cash, paying down debt and wondering what to do.

Historically great returns have been made by investing at the point of maximum pessimism. It is a widely held investment ethos that you can never catch the bottom of the market and you shouldn’t try. So what should you do? The answer for many is the same as it was last year. Seek out long term leases secured against excellent covenants, focus on an income model, rather than pursuing capital growth and only buy in strong locations.

Over the next six months the principle influences are likely to remain the same with a severe shortage of investment capital, difficulties raising debt, a limited supply of properties and vendors not wishing to sell at current market prices. There is also a mismatch between the price at which vendors are prepared to sell and the amount purchasers are willing to pay. In many areas the expectations of vendors and purchasers are gradually becoming more aligned even though prices are continuing to trend downwards. Unfortunately the volume of investments being brought to the market is rising, creating an over-supply, which is likely to continue to cause prices to drift downwards.

Looking at the rental returns available in the market today this shows a huge range. Investors commonly pay a price that reflects a yield in the order of 5% for small supermarkets such as Tesco Metro, whilst some secondary and tertiary offices can be bought for yields in excess of 16% or even 20%.

So why would you invest in property this year and how can anyone be bullish?  Much of the money coming into the market is driven by overseas investors viewing the UK as a sanctuary from the euro and property is seen as relatively safe compared to other asset classes. Provided the tenant has a strong covenant and a long lease, there is an element of certainty in relation to the income return.

There are also increasing numbers of property companies who have decided that property is now cheap compared to other asset classes and by historic measures. If you can buy a good quality building for roughly what it would cost to build, and receive a yield of circa 9%, then at some point in the future it will prove to be a good buy. Prices may drop further, but calling the bottom of the market is impossible. In the meantime, your investment is giving a cash return of about 9%. For those who introduce even modest gearing, the income return may rise to in excess of 12%. In this environment when making money is so hard, such a deal would seem reasonable.

Finally, the case for occupiers to buy in their own freeholds is continuing to strengthen. As a tenant, it is generally worth considering if you have operational requirements for the property, for at least ten years. The cost of any debt secured upon the property is likely to be significantly less than the current rental outgoings. Ownership of the freehold provides a company with an asset rather than a liability and allows accurate forecasting of future real estate liabilities. Historically, companies frequently refused to buy property. They believed their money could drive greater returns, by being invested in the business. Today many businesses are sitting on cash. Buying-in their premises, not only provides an asset but also serves to reduce outgoings and means they don’t have show future rental liabilities in their accounts.

Vail Williams LLP, leading real estate advisers, have secured the sale of Unit 40 South Hampshire Industrial Park, Brunel Way, Totton, Southampton SO40 3SA, which was on the market for a quoting price of £275,000, to a private owner occupier who has purchased it as part of his SIPP (Self Invested Personal Pension). Tacanova UK Limited will trade from the premises.

The industrial unit is on the popular South Hampshire Industrial Park on the north side of Totton, just over a mile from the M27. The unit covers 3,396 sq ft (315.5 sq m) and includes an open plan warehouse with ground floor ancillary accommodation, first floor office space and on-site parking. The virtual freehold runs for 999 years from 25 December 1987.

Andy Gibbs, Associate and Head of Business Space at Vail Williams’ Southampton office commented: “The South Hampshire Industrial Park is a very popular location and we are very pleased to have secured a sale in the current market where the majority of deals are leases.”

Vail Williams LLP, leading real estate advisers, have appointed Stephen Oliver as a Partner in their Gatwick regional office to expand their agency activity in the area.

Stephen has over 23 years of experience working in the commercial property agency market, operating throughout Sussex and the South East. He specialises in office and industrial property and will be working alongside the existing agency team to expand the agency activity of Vail Williams throughout the Gatwick Diamond area, as well as supporting existing clients.

The Head of Business Space at the Gatwick Regional Office, Andrew Osborne, said: “Stephen has a real depth of experience of the Gatwick Diamond market and we are delighted that he is joining the team.”

Vail Williams LLP, leading real estate advisers, has appointed Jenine Toms to lead the marketing drive in support of business development for the company across the UK.

Jenine has worked in a variety of marketing roles in professional services and the leisure and hospitality industry, based on the south coast and central London. At New Forest Hotels, she led a re-branding project for the company and developed their marketing and PR activities, raising the profile of the business across the region and beyond. Prior to this she was part of the marketing department in BDO, where she worked on regional and national marketing campaigns to support the company’s broad range of business activities.

Stuart Dawson, Head of HR at Vail Williams commented: “We are very pleased to welcome Jenine to Vail Williams. Our business is experiencing steady growth in key geographical and functional areas and Jenine’s role will be to help us develop this business further through pro-active marketing and communication programmes with clients and our key markets.”

Vail Williams LLP, leading real estate advisers, have expanded their services to clients in the Midlands with the appointment of Charles Warrack as an Associate, who will add further focus to agency activity in the area.

The Birmingham office has specialists in Valuation, Property Asset Management and Development services as well as Agency and has seen a steady growth in business in recent months.

Charles Warrack has over fifteen years of experience working in the commercial property agency market, operating throughout the Midlands having joined from Jones Lang LaSalle where he gained eight years of experience. Charles will be working closely with Partner Ross Bendall and will have specific responsibility for expanding the office’s agency business.

Also based in Birmingham, Chris Cave is an Equity Partner and Head of Development for Vail Williams and has specialist skills in site assembly, option agreements and development funding. Paul Arnell is an Associate and has expertise in Valuation, Lease Advisory and Property Management. Also in the Birmingham team is Gerry Garrard who is a specialist in Facilities Management and Property Asset Management. Nigel Tincknell, Partner, and Nick Parkes, Associate provide clients with Building Consultancy, giving a broad range of expertise to help clients protect their property interests.

Chris Cave, the regional partner for Birmingham, commented: “I am delighted with the new appointment of Charles to Vail Williams. He will allow us to further strengthen our offering to clients in the Midlands and to build on the specialist expertise available from the existing team. There are many opportunities for us to grow the Vail Williams business in the Midlands and I believe we have a strong team who can add significant value to both existing and new clients.”

25/01/2012

Vail Williams LLP, leading real estate advisers, have secured a fifteen year lease with Bathstore for an industrial / trade counter unit at Unit 4 Winchester Trade Park, Winchester.

The unit is 3,023 sq ft (280 sq m) and is located in the heart of the Winchester Trade Park, which is less than a quarter of a mile from Junction 9 of the M3 and less than a mile from the centre of Winchester. The unit has an electrically operated up and over loading door. Bathstore, who are the UK’s largest specialist bathroom retailer with over 160 UK stores, will be using the facility for storage and distribution plus ancillary trade counter. The company has taken a fifteen year FRI lease incorporating a tenant break in year ten and rent reviews every five years. The quoting rent was £39,000 per annum exclusive.

Vail Williams acted jointly with Jones Lang LaSalle for Ashquay Properties Ltd, who have recently gone into administration. Stephen Parker acted for Bathstore.

The entire Winchester Trade Park has now been purchased by Hargreaves Properties who were represented by Lambert Smith Hampton.

Andy Gibbs, Associate and Head of Business Space at Vail Williams’ Southampton office commented: “Winchester Trade Park is in an excellent location for access to the motorway network which should suit the requirements of Bathstore. One other unit, Unit 5, which offers 3,025 sq ft, still remains available to let and we are confident that this will be occupied shortly.”

Weight Wash, an industrial dry cleaners, suffered a catastrophic fire early on Friday morning which was attended by over 60 firefighters and fire units from across Hampshire. The fire was contained within the unit, but caused extensive damage.

Josette Tucker of Vail Williams commented: “We got a call from the Landlord’s agent at Calmore Industrial Estate at 4pm on Friday 20^th January, to ask if we could help find new premises for Weight Wash so that they could continue trading. Our client and Landlord of Unit 43 South Hampshire Industrial Park, Totton agreed to help and we were able to arrange a licence at very short notice. With the help of Lisa Busby at Paris Smith, we were able to get a licence drawn up and signed and we were able to hand over the keys by 6.30pm that evening.”

Weight Wash has taken the unit for three months whilst they find larger new premises. The unit is 3,551 sq ft (330 sq m) and is an end of terrace warehouse unit which is predominantly open plan with a first floor office. In three months the unit will be fully available to let again.

Vail Williams have also been acting for a further unit on the estate which is due to be completed shortly.

Link to article in WantSpaceGotSpace

The current economic climate is presenting most businesses with unprecedented levels of challenge. Naturally, the commercial focus for most businesses is firmly on the core business. Real estate issues may not be a top priority, however, the commercial property market has changed significantly in a very short space of time and with change comes opportunity. It is well worth any occupier looking at their current needs and for most businesses there are some excellent opportunities to cut costs and put themselves in a more advantageous position for the future.

1. Recognise the value in your lease. Your lease is an important bargaining tool. Landlords want commitment and a steady income stream. Currently the balance lies with the tenant. Break clause renewals are valuable opportunities for you to improve your term or the conditions of your tenancy.
2. Early negotiation can pay dividends. You don’t need to wait for an upcoming event such as a break or end of a lease to enter into negotiations. Landlords are also looking for security of income and are willing to reduce costs for longer tenures. Break clauses can be traded for better terms and there are other possibilities for securing a more settled future for your business on more favourable terms.
3. Scrutinise your business rates. Experience has taught us that many companies are frequently overpaying on rates. Often they are unaware of their entitlement to rate relief or have little knowledge of what might qualify them for a reduction in rates.
4. Don’t let planning permission lapse. Most planning permissions now have a life of three years. With many developments being delayed it is important not to let these permissions lapse or asset values could be seriously affected. Renewing lapsed consent can be both costly and challenging with the continual changes in planning regulations.
5. Renegotiate or seek to remove Section 106 legal agreements. With falling values and finance harder to obtain, the level of financial contributions sought through some Section 106 agreements can seriously impact on the financial viability of some developments. Some Local Planning Authorities recognise this, so now is a good time to re-negotiate or remove such obligations.
6. Look at what you are paying in service charges. Most occupiers never question their service charges. They should! Frequently landlords overcharge or include items that don’t conform to the terms of the lease. A simple audit can often rectify matters, saving important costs and avoiding time-consuming and unnecessary disputes at a later stage.
7. Use your bargaining power to mitigate dilapidations. This isn’t just about cost savings but cost avoidance. It pays to take a more sophisticated approach to your repairing responsibilities. Your own accurate assessment of the extent of your liabilities at an early stage means that you can take a more prudent approach to budgeting. It also means that you can use this as a factor in future lease negotiations to mitigate your liabilities.
8. Plan maintenance to create cost certainty. Planned maintenance of your property has two great advantages. Over time a proactive approach will undoubtedly reduce costs. It also means that costs are spread better over time, improving cashflow and providing greater cost certainty for the business.
9. Take stock of your space requirements. Are you using your space effectively? Is there scope to consolidate your accommodation? It could well be that there is an opportunity to restructure your lease and secure a better deal on less space.
10. Now could be the time to invest. With the fall in commercial property prices and interest rates at their lowest for decades, now could be a good time to consider buying a freehold. Mortgage payments are often less that half the cost of renting, whilst the company or pension fund also gains an asset.

The advice outlined here represents some of the ways in which occupiers can make the most of the current economic conditions. Vail Williams works nationally with a wide variety of organisations to reduce their real estate costs and create commercial advantage for them where they may not recognise the possibilities.

Following thorough consultation and the public examination, the Mayor intends that the levy will be payable on most new developments from April 2012.

The levy is intended to raise £300 million towards the delivery of Crossrail, which is essential to the capital’s growing economy and to ensuring it remains a competitive global business centre in the 21st century. It forms part of the funding package for the project agreed between the Mayor and ministers. It is proposed to charge the Levy on most developments in London at the following rates:

• Zone 1 boroughs – £50 per square metre (Camden, City of London, City of Westminster, Hammersmith and Fulham, Islington, Kensington and Chelsea, Richmond-upon-Thames, Wandsworth)
• Zone 2 boroughs – £35 per square metre (Barnet, Brent, Bromley, Ealing, Greenwich, Hackney, Haringey, Harrow, Hillingdon, Hounslow, Kingston upon Thames, Lambeth, Lewisham, Merton, Redbridge, Southwark, Tower Hamlets)
• Zone 3 boroughs – £20 per square metre (Barking and Dagenham, Bexley, Croydon, Enfield, Havering, Newham, Sutton, Waltham Forest)

BOROUGH WIDE ADDITIONAL STRATEGY:

The London wide strategy will be applied in addition to the borough’s individual CILs. This will have a big financial impact on development in these areas, and should be factored into the viability of any scheme coming forward. It is recommended that developers should consider the cost implications now, and try and put planning applications through, where possible, prior to the CIL being adopted. It is imperative that development appraisals / viability assessments consider the current and future charges. In a number of instances, such as the London Borough of Kingston the CIL for that area may not be adopted until the Autumn 2013.

For further advice contact James Lacey or, another member of our planning team.

As there will be a presumption in favour of development, it is more important than ever that those wanting to develop seek timely advice. It would be worthwhile discussing the implications of the attached with freehold owners of sites especially given the fact that where Planning Authorities do not have up to date guidance this is a material consideration to the determination of applications. We project manage and work formulate strategies to achieve planning permission and would welcome meetings with potential clients to focus on what this means to them.

If you have any queries or ideas plesae contact James Lacey, Chris Wilmhurst or a member of the Planning team