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A Bellwether for London Realty - London, England, UK - posted by
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On June 11, 2014, the New York Time ran the following story:
"A Bellwether for London Realty
By JENNY ANDERSON
LONDON — When the global bank HSBC sold its London headquarters tower to a Spanish buyer in spring 2007, at the height of the credit and property boom, the deal was the single largest real estate transaction in British history.
Then the boom went bust, prompting a fire-sale handover of the building back to HSBC. Next came the nadir. A new owner, this time from South Korea, bought the tower in hopes of a rebound.
Now the 44-story building, still serving as HSBC’s headquarters, is for sale yet again.
Because the market is teeming with international money, some analysts predict the price this time will surpass that 2007 record of 1.1 billion pounds, or $1.8 billion — a forecast that might say everything you need to know about the boom-bust-boom of London commercial real estate.
Except that there is actually much more of a story to tell about the HSBC tower. As goes this building, so goes the London market.
“It traded right at the top, and then again at the bottom and now it’s right back up at the top,” said Simon Mallinson, managing director of Real Capital Analytics, a company that tracks global real estate transactions. “The tower is reflective of where the city is.”
Prices for London office buildings, not adjusted for inflation, have surpassed their previous high point reached in 2007 by 10 percent, according to Real Capital.
Last year, £19 billion worth of commercial real estate was sold, compared with the previous record of £17.9 billion in 2007, according to another firm, CBRE Global Research and Consulting.
“2013 was a storming year, the best year we have ever had,” said Neil Blake, a CBRE executive.
In recent months, the American investment company Blackstone, which scooped up London property during the depths of the crisis, has sold its stakes in two major building groups, posting giant profits on each. In a separate deal, St. Martins, the property division of the Kuwait Investment Authority, paid £1.7 billion — in cash — for another group of London buildings.
Residential real estate in London and southeast England generally, propelled by foreign money, is also on a tear, with prices running at an annual growth rate of 17 percent — which has politicians and central bankers wondering how to subdue the frenzy.
For international investors in commercial real estate, London has some important advantages over the United States. Sales proceeds on buildings do not incur capital gains taxes, and leases are much more favorable to owners than to renters.
The standard London lease terms, in real estate lingo, are “full repair, insure, upwards only with five-year review.” In other words, the tenant is responsible for any repairs, must insure the building and understands that typically the rent can only rise, not fall, after five years.
But as commercial real estate soars once again, banking is not driving the market as it did in the previous London cycle.
“The banks have been very much reduced in terms of occupancy needs, and what we see is the growth of other sectors,” said Peter Bennett, city surveyor for the City of London."
Type of publication: Newspaper
When was the article reported?: 06/11/2014
Publication: New York Times
Article Url: [Web Link]
Is Registration Required?: no
How widespread was the article reported?: international
News Category: Business/Finance
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