Falling hotel occupancy levels and room rates mean that there is less income for hotel investors, many of which have financed these commercial properties through high levels of borrowed debt. As a reaction to the adverse market conditions many hotels are now offering rooms at highly discounted rates. The three and four star hotel market has been hit especially hard and they have had to heavily discount their room rates in order to remain competitive. Holiday Inn / Holiday Express have implemented a credit crunch action plan which includes lowering their rates to around £21 pp in the UK, increased promotions and marketing to their customers and target audience, and asking suppliers for either better terms or lower costs so that they can continue to remain competitive within the hotel commercial property industry.
Budget hotels are not completely recession proof either and companies such as Travelodge have experienced a fall in business stays and leisure at the weekends. However, despite these slight declines they are taking full advantage of the credit crunch’s effects on the commercial property market and have purchased several great value real estate deals that before the recession would have been unavailable to them.
Budget hotel chain Jury’s Inn are also taking full advantage of the increasing demand for budget hotel accommodation that has been created by the recession and are spending £90 million on opening four new hotels across England and Scotland. They are developing hotels in Portsmouth, Bradford, Newcastle and Glasgow as part of their plan for accelerated growth. They are hoping to take full advantage of the trend for business users and British tourists to stay in cheaper hotels and have also secured several lucrative commercial property deals that before the credit crunch simply were not feasible or available to them.
Despite the overall economic downward trend in the UK there have been nationwide sales increases for budget and cut cost retailers and service providers, whether they provide food, clothing or leisure breaks. The UK consumer products and commercial market is becoming increasingly buyer led. Consumers are finding that there are great offers available to them either through heavy discounting of high end brands or through taking full advantage of budget products and services that are also offering promotional pricing and offer based marketing to their customers. Travelodge and Jury’s Inn are taking full advantage of this trend and are setting themselves up for long-term growth with new commercial properties and increased customers.
Despite the overall decline in the UK hotel market cash rich buyers will find that over the next couple of years there will be some great hotel commercial property investment opportunities available to them.
UK commercial property returns in 2008 are set to be the worst recorded for eighteen years and RICS has warned that commercial property values could still fall by a further 25% over 2009 and 2010. For tenants looking for commercial properties to lease this isn’t all doom and gloom as it is resulting in commercial real estate landlords offering increased inducements, incentives and sharp drops in their rents.
The credit crunch has hit the financial services and properties industries the hardest. Canary Wharf is currently one of the most exposed areas in the UK and facing the threat of increasingly empty buildings. As the financial district of London it has been hit hard by the credit crunch and potential tenants have found that there are now many bargain lets to be had.
Despite the negative effects on the financial and properties sectors some industries are in fact seeing and upturn as a result of the credit crunch and are actually seeking out more commercial property. Certain sectors are now actually in their element as a result of Britain’s tightening purse strings. Cash convertors, the Australian founded company that provides pawn broking and other cash raising services has experienced a significant growth in profits compared to previous years which corresponds with the overall decline in the economy and has actually opened a higher than average amount of new stores this year. Their customer base has widened in variety too with it now not being uncommon for city businessmen to visit the store because they need a short-term, quick cash injection.
Other industries experiencing upturns are bailiffs, tax advisers, takeaway providers and any kind of budget provider such as budget hotelier Travelodge or budget supermarket chains Lidl and Aldi. As a result of redundancies and investment downturns some people are having to make huge cutbacks however, the majority are looking for smart ways to save money that don’t affect their current lifestyle too much. For example, having a takeaway or going to a cheaper restaurant rather than fine dining; shopping at a cheaper supermarket and using cheaper hotels for business travel. Companies seeing an upturn despite or in fact because of the credit crunch are in a highly enviable position. Not only are they seeing increased profits but they are also making plans for expansion when the rest of the UK is sitting tight or planning cut backs. Their expansion plans will benefit even further from the credit crunch due to the fact there are now a lot of cut price commercial properties available to these businesses that previously may have been inaccessible.
The commercial properties market may be experiencing a current downturn but the industry’s prestigious RICS awards are as popular as ever. Developers and companies in the commercial property industry are finding themselves having to look out for new ways to stand out in this increasingly tenant driven market. Buildings and land no longer lease or sell themselves and developers have to be ever vigilant in order to remain successful. The publicity, raised awareness and prestige that a commercial property award brings could be just what businesses involved in the industry need in order to stay ahead in these difficult times.
The awards annually celebrate built and natural environment projects that demonstrate excellence in the categories: Regeneration, Building conservation, Community benefit and a commitment to value for money and sustainability. Investment property is no longer a viable option for many large financiers so awards like this help to bring the buildings industry back to the forefront of investors’ minds.
The 2008 RIC awards winners were announced in October and the winner of the esteemed project of the year award went unsurprisingly to St Pancras International. This commercial property project is an example of real estate excellence and is a magnificent £800 million architectural restoration and extension of a unique London landmark. The station that first opened in 1868 was seen as a stunning accomplishment of Victorian engineering and commercial property. In today’s London the St Pancras International station now houses the Eurostar and has been dubbed the “cathedral of railways”. It is far more than simply a train station though and its recreational value rivals that of large international airports and shopping centres. It has been redeveloped as a grand retail and hospitality destination with many businesses there including top quality retail outlets and even Europe’s largest champagne bar!
Previous RICS awards winners include the Spinnaker tower, Portsmouth which is a 170 metre tall visitor attraction that overlooks the historical Portsmouth harbour and the Solent and the Eden Project in Cornwall.
Many of today’s headlines are quite rightly concerned with the international downturn the credit crunch is causing. Tales of redundancies, bankruptcies, slashed sales figures and financiers losing millions from their real estate investments are reported on a daily basis. Consumer confidence is falling and Great Britain is officially on its way to recession. One of the hardest hit sectors is the properties industry with realtors worldwide experiencing huge downturns in profits. Commercial properties simply aren’t leasing or selling and personal property sales are also at an all time low. Land is no longer worth its weight in gold and financiers are panicking and rapidly decreasing their investment property portfolios. However, some industries have benefited from the credit crunch. One of such industries is the discount food sector which has been experiencing unprecedented growth during what they are calling a credit crunch boom.
Aldi one of the key discount food retailers has recorded a record 23.9% year on year growth for the year ending November 2008 and plans to open between forty and fifty new stores a year across the UK and Ireland in a massive commercial property investment. One of Aldi’s key commercial objectives for the following year is to join forces with discount hotelier Travel Lodge. Aldi and the budget hotel chain plan to develop joint hotel and store sites throughout the UK and are currently undertaking a major commercial properties investment. The first joint hotel and store site will be in Newquay Cornwall and is due to open in the autumn of 2009. Travelodge are planning to develop a 74 room hotel above Aldi’s existing Newquay store. The next joint venture will be undertaken in Middlesbrough and will involve the pair becoming involved in a commercial property deal to launch a joint store and hotel in November 2009.
The Managing Director of development for Travelodge has reported that this new venture is enabling both companies to send out a clear message to the UK that the UK budget sector is going to make the most of the economic downturn. The credit crunch means that there are more commercial properties for sale and for lease available on the market than ever before giving Travelodge and Aldi availability to commercial property that wouldn’t have been accessible to either of them before.
The budget food and hotel sectors aren’t the only industries benefiting from the credit crunch and several online dating companies have seen an unprecedented increase in new members since the economic downturn has taken hold. New members are reportedly looking for new ways of meeting people that don’t involve spending money out on the town.
According to the annual strategy review by global property fund manager La Salle Investment Management, the UK commercial properties market could be a great long-term investment. La Salle has reported that the UK commercial property market has fallen first and hardest therefore now making it one of the most attractive areas in terms of investment.
This is a great bit of news in an otherwise gloomy time for commercial property and should hopefully generate lots of interest amongst real estate investors over the next year. Due to the huge downturn UK commercial properties should offer some extremely appealing return on investments and provide investors with some great value deals in 2009 and 2010.
The commercial property market has been one of the credit crunch’s biggest victims. A previously booming industry has seen huge downturns and is still expected to fall further in value. Previous commercial buildings that once had leasing waiting lists are now standing empty with landlords having to offer all kinds of inducements and incentives in order to entice tenants in.
Dominant high street brands such as Focus and Land of Leather are some of the latest retailers that have had to seek concessions from their landlords as the impact of reduced consumer spending has taken its toll. Landlords and businesses have to remain ever reactive and innovative in order to stay afloat during these hard times. UK commercial property owners do appear to comprehend the downturn and are remaining vigilant and working out two-way deals between themselves and their tenants that are in all parties’ best interests. If you are currently looking for commercial property for lease or for sale within the UK there are some great bargains to be had.
Foreign investors have cottoned on to this and see the UK as an ideal area for long-term commercial property investment. A high percentage of office blocks, retail outlets and other commercial buildings are likely to come under foreign ownership over the next two years where investors will be taking full advantage of the current value declines within the industry. Previously iconic commercial buildings could be sold off at bargain prices to investors willing to wait for the market to right itself before they see returns on their investments.
The global credit crisis continues to affect investment into the commercial properties sector. Commercial property returns over the last twelve month period are looking to be close to the worst twelve month real return on record which occurred in 1974. RICS are predicting that over the next two years things are going to get even worse with the decline in capital values far outstripping the slumps of the 70’s and 90’s.
Investors are pulling out of commercial property fast and in doing so are leaving a very much tenant driven market behind. These are unstable economic times and tenants are looking to landlords to help them out with their commercial property lease agreements. As a result landlords are offering better value inducements, incentives, lettings agreements and rents than ever before in order to ensure their buildings do not become empty.
Despite the huge downturn in commercial property investment there are still some areas within the commercial real estate sector that are deemed viable investments. Student accommodation investors are still hoping for a successful new year and are counting on the fact that in times of recession many people put off entering an uninviting job market that is often only looking for experienced employees and look instead to improve their long-term professional prospects through training, qualifications and academic achievement. This combined with the fact that there is a shortfall in modern halls of residence and you get a potentially great investment formula in spite of the recession. Many commercial buildings are emptying fast, already standing vacant or are nowhere near full occupancy however, this formula is likely to mean that any commercial property investment into student accommodation is likely to see almost full occupancy even if some of the students drop out, which inevitably happens every year with a small percentage.
The worsening economic conditions have now taken their toll on almost every commercial property market in the world, according to a global survey of real estate surveyors. The past few months has shown a sharp decline in the need and demand for real estate in areas that had previously appeared immune to the current economic crisis. In particular parts of Asia and Eastern Europe have been affected with realtors’ allegedly reporting record downfalls in the demand for commercial properties. The Indian commercial property market has been especially hard hit and one of the biggest slumps in real estate values has been seen in Eastern Europe a region that up until recently was experiencing a boom in their building and developer industry. Areas such as Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Russia, Slovakia, Turkey and the Ukraine have all reported a fall in land and real estate values, with Russia being the hardest hit country.
The credit crunch has literally burst the Bulgaria property bubble with financiers desperately trying to sell any investment property they have there. Bulgaria’s economy has been left in a serious state due to heavy investments into tourism and commercial property in preference to expenditure on manufacturing and exporting.
Russian commercial property investments are also being put on hold as the now global credit crunch sets in. Developers in Russian cities are postponing projects due to lack of capital, with shopping centres and malls being the most affected. Major cities such as St Petersburg and Moscow are feeling the financial pinch as well as regional cities whose plans for expansion have had to be put on hold.
However, some countries are showing more resilience than others to the economic downturn. RICS research has shown that China’s commercial property market has shown more resistance with some actual increases to be expected in the number of commercial property that is being leased and sold throughout China in the upcoming months.
Central London is another city that has been hit hard by the commercial property down turn with investment funds that specialise in retail developments and office blocks being especially knocked by the slump. Retailers are being encouraged to fight the downturn in sales this Christmas by ensuring they provide unrivalled brand value, competitive consumer focussed pricing and value added promotions that encourage repeat purchase activity as opposed to the usual seasonal glitzy TV campaigns.
Areas such as Canary Wharf that are at the heart of the financial services district in London have already experienced many sharp decreases in office rents. Landlords are offering their once lucrative tenants decreased rents and better value inducements in order to keep their London commercial property occupancy levels up in an attempt to try to counteract the effects of the credit crunch. Investment banks and commercial banks have had a tough year and nothing demonstrates this more than the increasingly empty office spaces in the centre of London’s financial district. However, it can be argued that despite this it is the London hedge fund businesses that have been the most hard hit. These once lucrative companies used to have their pick of swanky London commercial property but as the credit crunch has taken its toll their once plush and buzzing offices are being vacated at an alarming rate. During the hedge fund sector boom the cost of London commercial property was of little importance to these businesses. The high profitability that many of them enjoyed meant they were willing to front the cash and substantially outbid any rivals in order to get their staff into the right location and office space for their business. Swanky areas such as London’s Mayfair were buzzing with profitable hedge fund businesses that were willing to pay steep rents in order to be located in a prime London commercial property location.However, the current economic downturn has hit these businesses hard. The downturn has forced hedge fund businesses to either vacate their office space or renegotiate rents as part of a cost cutting exercise. This has left landlords with little choice than to reduce their rents and increase their inducements or see their office space stand empty. As a result leasing rates for swanky London commercial property offices in plush areas such as Mayfair and St Jame’s declined by almost thirty percent last year. It is not just the financial businesses in London that have been affected by the downturn. Average rents fell by approximately 19% across London at the end of 2008 compared to the end of 2007, however, it is the financial areas that have been hardest hit with rents falling significantly below the average decreases.Despite the hard ships currently bestowing London commercial property owners and investors the next few years are expected to bring some amazing UK property investment opportunities to cash rich buyers who will be able to take advantage of some great commercial property offers and deals.
Reports show that hotel transactions in the UK during the first three quarters of 2008 have declined by 69%. The credit crunch has directly impacted the hotel transactional market and commercial property transactions within the hotelier market are notably down. One of the biggest transactions so far this year has been the sale of a 50% stake in the Jurys Inn Chain, showing that during these hard times it is the budget sector that continues to generate interest from commercial property investors, especially those from the Middle East. This is backed up by news from Travelodge who are seeing a continuous shift of customers moving towards budget accommodation, especially amongst business travellers. This has led them to buy several more properties and to plan a joint venture with budget supermarket chain Aldi.
Good economic conditions and favourable credit options meant that 2005 to mid 2007 were extremely good years for the hotel transactional market. However, over the last year or so the lack of available debt and increased costs has seen a sharp decline of transactions within this marketplace. The current economic climate is not a healthy one for the UK hotelier commercial property market but, there are still opportunities for financially strong real estate buyers to make some extremely clever investments. Commercial properties that come on the market as a result of the credit crunch could be snapped up at bargain prices and could prove to be valuable long-term investments.
UK hotel owners have seen declines in room rates, occupancy and room yield throughout 2008. As a result hoteliers have been providing increasingly discounted rates in order to entice more customers and stop customers from transferring over to the budget hotel market. Despite this the PKF Hotel Consultancy services latest report showed that room rate, occupancy and room yield were down in London and throughout the UK.
The US hotel market is seeing similar if not stronger declines over this same period. Understandably it seems to be the tourist areas such as warm weather, leisure-orientated and seasonal markets that have been and are predicted to be worst affected. The PKF report shows that five of the top seven forecast city declines in revenue per available room are expected to occur within the state of Florida. So far most US hoteliers have stood their ground and have not been providing discounted rates despite the declining demand, in fact room rates actually increased in some areas in 2008. However, in 2009 a decline in room rates is expected as a result of the current demand decline. As a direct result further decreases in hotel commercial property and commercial real estate transactions are forecast throughout the US.
Today’s constantly fluctuating property market can make investors nervous about committing to commercial property yet investing in commercial property in London remains a concrete investment as there is always a high demand for commercial property in a prime location and if the building is in good condition and well maintained, a return of investment should be fairly easy to redeem.
If you are contemplating leasing or buying a commercial property it is important to understand industry talk to ensure you get the best deals available to you. The best way to ensure you are not getting ripped off is by seeking professional expertise from a property consultant or specialist in the commercial property sector. This will ensure you will be able to increase your understanding of this niche market as well as knowing the specialist will be seeking out the best deals and negotiating them on your behalf, saving you considerable effort, time and ultimately money.
By recruiting the help of a property consultant you will make sure your property journey runs smoothly and in a more focused manner. Just like buying a car where you take advice from the dealer, a property consultant will advice you on all your property queries.
Their expert knowledge on location is outstanding and their previous experience with clients’ shines through. They know exactly what location would be right for your business and help you through all of the advantages and disadvantages of working in specific areas all over the capital. Whether it’s the West End The City or Mid Town that you are looking for it’s likely commercial property specialists would have got the deal done there before so are much more aware of the prices the benefits and the rip offs property hunters can encounter.
The property game can be all about timing things right in order to get the best deals, or it might be striking while the market is in a slump which means good negotiation skills from commercial property specialists to get some fantastic long term flexi rate contracts.
Location is really important to any business and when you are looking for new commercial property premises then you must make sure you know as much information as possible about the area. Finding out what kind of local businesses are around can be great for business contacts and can contribute to the successful running of a company. When looking for commercial property in London you should also investigate local transport links to see how you and your employees can get to work, such as the nearest underground stations and bus stops. All of these things can be made easier by liaising with a commercial property agent.
