“Western Corridor sees strong demand in Q3.” “Central London office investment dips.” “Manchester office take-up soars.” Some of this week’s headlines on Radius Data Exchange, much like elsewhere these days, are nothing if not contradictory.
Mixed signals fly in from all angles – from Brussels to Westminster, Mayfair to Spinningfields. And they point to uncertain times.
But don’t confuse uncertainty with unqualified gloom; for some they spell opportunity.
The former executive chairman of Valad Europe, Martyn McCarthy, announced his return to the European real estate investment market this week through his company Arrow Capital Partners.
He has teamed up with Christian Bearman, who was also at Valad. And while Arrow won’t make an immediate return to the UK, it is preparing to. It’s reasons for doing so – whatever the outcome of the Brexit negotiations – are instructive.
“If you take a scenario where if we have a bad Brexit, there is going to be a fundamental readjustment in pricing, and that might be an interesting point to enter,” he says. “If not, then the UK is still a great place to invest on a longer-term basis in a more stabilised environment.” Others will no doubt feel the same.
In a different way, SEGRO’s latest trading update this week reinforced the message that changing circumstances create opportunity for those willing to adapt.
As internet shopping and online delivery continue their relentless rise, chief executive David Sleath said Amazon was set to become the warehouse operator’s largest customer.
“Three years ago Amazon was nowhere as a customer for us; now they’re the second largest and likely to become the largest,” he said. It’s a change which, more than anything, has helped SEGRO become the UK’s largest listed property company. But that wouldn’t have happened had it not successfully anticipated that rise, and responded and executed its business plan effectively.
When, in August, House of Fraser said it was to shut three stores and was mulling the closure of a fourth, its new owner, Mike Ashley, blamed “greedy” landlords.
It was unhelpful, to say the least, prompting Melanie Leech, chief executive of the British Property Federation, to say: “What has been taking place is negotiations between HoF and its landlords – a two-party process – where each party will have its own interests and one party can’t simply cry ‘unfair’ in the media when it doesn’t get what it wants.”
Contrast Ashley’s less than grown up approach with comments in EG this week from Sergio Bucher, chief executive of Debenhams (in which Ashley owns a 30% stake). “The fortunes of retailers and the investors who own our shops are intrinsically linked. At a time when UK retail is going through a period of change as dramatic as any of us can remember, there is a pressing need to work in partnership to define a new future for physical retail.”
Bucher urges joint work between landlords and tenants on business rates and a levelling of the fiscal playing fields between physical and online retail. He concludes: “Effective collaboration with landlords is crucial to the future of Debenhams. If we can work together, I am confident we can build a sustainable and exciting future for department stores at the heart of the high street and, if we do that, everyone benefits.”
All other things being equal, I know which tenant I’d rather deal with.
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