For the least hyperbolic coverage of 2016’s latest political shock look to the Buchan Observer, which led with: “Aberdeenshire business owner wins presidential election.”
Coverage in the paper, whose patch includes the Trump International Golf Links at Balmedie, was definitive, devoid of speculation and raised a smile. This week, that made it something of a rarity.
It may be too early to predict what a Donald Trump presidency means to property in the US, much less on this side of the Atlantic. But it creates fresh uncertainty in a year that has been awash with it. Plenty, however, were willing to try to draw conclusions.
For Cushman & Wakefield’s Elisabeth Troni, Trump’s victory meant London was no longer the “stand-alone basket-case with crazy populist rhetoric”.
But for Jefferies analyst Mike Prew, “things could get messy” for both the US and UK real estate markets as a result of the part-Scottish property developer’s triumph (click here to read EG’s round-up of property comment and predictions).
Within hours, US Treasury yields had jumped to their highest levels since January, with markets believing Trump’s policies could spark a rise in inflation, growth and ultimately a rise in interest rates. Those higher bond yields would reduce the gap in the spread with property yields, making this sector less attractive.
Prew also warned of potential for another run on the open-ended real estate funds in 2017 in response to the greater market uncertainty, adding to a London office occupational slowdown post-Brexit.
And those are not the only warning bells sounding this week. Derwent London rang others in its third-quarter market update 24 hours after Trump’s victory. It cited Brexit-related uncertainty and warned that: “The recent confirmation of the higher business rates applicable from April 2017 and the rise in stamp duty land tax in March 2016 have had a negative impact. Together, these have led to a reduction in London commercial property values.”
Derwent has perhaps the most envied portfolio of any UK REIT, yet its valuer CBRE “has indicated that the valuation performance of the portfolio is unlikely to have been immune from the general weakness demonstrated by the IPD Central London Office Quarterly Index despite our high levels of lettings”.
That said, it wasn’t all about warnings. Derwent announced record lettings for the quarter. And it cannot be emphasised enough that with no glut of space available and outstanding bank debt modest, this is no repeat of earlier crises. Meanwhile, high-end estate agents are reporting a surge in enquires from the US in the hours that followed Trump’s victory.
Could luxury London resi lead a national, pan-sector recovery as it did at the beginning of this cycle? Stranger things have happened.
But perhaps most significant of all is that the conclusion of the presidential election means another known unknown is out of the way, even if, like the EU referendum, it did not deliver the result most in property had hoped for.
Let’s get Article 50 served so businesses across the country can view the future with a little more clarity.
Speaking of the future, this week’s EG Industrial Summit was a wide-ranging and fascinating affair, one that went way beyond eaves heights, yields and rents per square foot.
Are electric vehicles – not drones – the key to cracking last-mile delivery? Will we as consumers have to sacrifice the convenience of same-day delivery to ensure our town centres remain navigable? Can beds and sheds coexist? And what will automation of logistics and warehouses mean for jobs and site availability?
“Technology will continue to change at an incredible rate,” Andrew Smith, strategy director at LondonMetric Property, told delegates. “The next five years will move much faster, and we also have the younger generations who have embraced it more, which is pushing it forward at a much quicker rate.” Brace yourselves.
This week EG launches a new charity appeal. But we don’t want your money or your time. All we want is for you to look in your sheds and garages – at home or across your portfolios – and see if you have any old bikes gathering dust. Donating them to our Big Bike Shed appeal could make a massive difference to someone’s life. Click here to find out how to get involved.
• To send feedback, e-mail damian.wild@estatesgazette.com or tweet @DamianWild or @estatesgazette
