The property market may be buoyant but demand is far from insatiable.
“In London take-up is healthy, vacancy rates are low, and rental values are rising,” said Land Securities chief executive Rob Noel this week. But you didn’t have to read too much between the lines of his interim management statement to conclude he was maintaining the cautious stance that has drawn some criticism in recent months. He also used his IMS to remind the investing world that the UK’s largest propco still has 1.1m sq ft of space to let.
Other landlords strike a similar note, talking of demand for space but often no great competition for it.
This caution is also evident in the latest, otherwise upbeat, RICS commercial market survey.
Business demand for commercial property in London has risen for the tenth consecutive quarter. Almost two-thirds of those interviewed said they were still seeing a rise in demand across all London markets, with available space falling for the ninth successive quarter.
Rents are expected to rise at the second-fastest pace since the survey began in 1998, with 71% more respondents in London forecasting higher, rather than lower.
So far, so good.
Yet in the capital 50% of contributors felt that commercial property valuations were “expensive” – an increase from 45% in Q1.
There is no shortage of grounds for optimism at the moment. But at the very least there are grounds for caution too. And with potential shocks in the system, do stay alive to those.
It’s not surprising but it is worth highlighting. The introduction of the community infrastructure levy has led to a significant fall in the provision of affordable housing in areas with CIL schedules. London is worst hit, according to JLL (p25).
For some, CIL charges are simply still being set too high. For others, it is the fixed nature of CIL that causes (or sometimes requires) developers to negotiate harder on affordable housing provision.
Short of wholesale policy reform, there’s not an obvious solution.
The need to sustain the UK’s bee population is well understood, even by developers. Earlier this month the Crown Estate, Grosvenor, Shaftesbury, the Howard de Walden Estate and the Portland Estate announced they were teaming up to create a green corridor, “making space for the plants, birds and bees that form a crucial part of the ecosystem in London”.
Design Council Cabe is looking to sustain a different population of bees – doubling its national network of built environment experts across England to 500 in a bid to help embattled planning departments (p25).
The move will help support Cabe’s worthwhile City Model initiative, designed to give developers early independent advice on major planning applications at the pre-application stage.
In itself, it won’t lift uncertainty and delay from the planning process but, after success in Oxford and Greenwich, it could help. Get involved.
We have an interview with another potential London mayoral candidate this week, former Arsenal and Spurs player Sol Campbell (p38). It would be easy to dismiss him as a less-than-serious candidate with little understanding of the considerable challenges facing the capital. More striking perhaps is how similar his Conservative policies are to some advanced by those seeking the Labour ticket.
Just as many of the measures in the chancellor’s summer Budget were close to Labour Party policy – a national living wage, reforming non-dom status and other tax tweaks – so mayoral policies appear to straddle the blue-red divide.
Campbell suggests tapping the bond market, for instance, an idea floated on these pages by prospective Labour candidate David Lammy recently.
What this means for the traditional political divide I don’t know. But the more policy commonality that exists, the better our chances of anticipating the agenda of the next mayor.
