A rise in new lending, falling LTVs and contracting interest rate margins: there has been much to celebrate in the property lending market in 2014. Welcome though it is, that buoyancy masks a looming problem.
I’ll come back to the threat highlighted by the latest De Montfort report, because there’s further seasonal cheer in the review of property-related lending in the first six months of the year. Talk of new entrants is becoming reality at last. A non-bank lender has cracked the top 12 active lenders for the first time in 2014.
And if you need reminding how far we have come, cast your mind back to this week five years ago. That De Montfort report revealed a market in retreat, specifically the first fall in UK property debt since it began measuring the figure a decade previously.
So the fact that £20bn was lent in the first six months of 2014 – compared with £30bn over the whole of 2013 – is very welcome indeed.
It is, however, the dearth of development finance available for spec projects that is a concern. No one wants a return to the cavalier days of 2007, but in many cities the lack of available grade-A space is becoming a threat to growth. And, to put it crudely, for any lender that can address that gap in the market with care and appropriate caution, there’s money to be made.
ν It has been an annus horribilis for Tesco. A fifth profit warning of the year this week has wiped another £2.2bn off the value of the retailer; its share price has almost halved over the period.
And this week it became clear just how far its stock has fallen in property circles.
The National Grid Pension Fund’s £250m Volt portfolio, which includes two Tescos, is now to be broken up and sold off in smaller parcels. Investors expressed strong interest in some of the 12 properties which make up the portfolio but no bids were received for the entire package – because of the supermarkets. One fund manager said too many investors feared a downgrade of Tesco would hurt any investment in properties leased to the retailer.
Some of Tesco’s troubles are linked to over-supply fears in the supermarket sector at large. But too many are of its own making.
Chief executive Dave Lewis – and his shareholders – will hope for a less horribilis 2015. An annus mirabilis might be too much to hope for, however.
ν Congratulations to all the winners at Thursday’s Estates Gazette Awards. JLL was the big winner on the night, picking up four gongs – including National Property Adviser, Industrial & Distribution Adviser and Offices Adviser of the Year. The firm’s own Sophie Walker picked the Young Property Professional of the Year trophy too.
One of the capital’s most high-profile politicians – Boris Johnson’s right-hand man, Sir Edward Lister – was given the EG London Award. Meanwhile, Liz Peace, chief executive of the British Property Federation until this week, won the Outstanding Contribution to Property Award for 12 years of lobbying, campaigning and leading from the front.
Intriguingly, the winners in the property company categories included more smaller players this year, with Exemplar (offices) and New River Retail picking up gongs. It would be ridiculous to claim this signals a changing of the guard, but it’s tempting.
ν Estates Gazette will be back with on 10 January. EGi, of course, will bring you all the news you need over the festive period, with bulletins appearing every day except Christmas Day. Next week we will also be publishing a special EG Awards digital edition with photos and videos of the night itself. Look out for that.
In the meantime, best wishes for the festive period from everyone at EG and prepare yourself for another year of opportunity in 2015.
