Global agents with a presence in Moscow must be struggling in Putin’s dire state. Last week Knight Frank reported investment volumes in the city had almost halved. The number flashed up largely unremarked on a screen full of positive numbers presented to 200 clients along with a full English breakfast at Claridge’s last week.
Investment volumes across 21 European nations are expected to reach €230bn (£166bn) this year, close to the level of 2007. The UK is Euro-champion with a rise of 28% to €76bn in the 12 months to June; Germany is second among the larger nations, up by 23% to €36bn.
France is the laggard with a mere 4% rise to £22.4bn. Poland lies second to bottom with a fall of 31% to €2.8bn. But right down on the floor lies Russia with a 46% fall to 2.8bn.
Expect bad news from any agent trading in Russia and spare a thought for Raven Russia, the UK-listed industrial developer. The company, set up in 2005 by Anton Bilton and Glynn Hirsh, has posted a first half loss of $20m (£13m), compared with a $45m profit last year. The firm, which has built 1.5m sq m of sheds in Russia, has plenty of money in the bank – $247m. But development has been halted. Raven has seen dollar income fall from $7.2m in the first half of 2014 to $4.1m in the first half of 2015 as a result of the plunging ruble. Today 66 rubles are needed to buy a dollar. Last autumn the number was 38.
There is a silver lining, at least for agents paying dollar rents. Pressed landlords are now agreeing to big reductions, using a formula that links the dollar rate to the fortunes of the ruble. Lower rents, of course, mean lower capital values.
Fat pickings
The Walkie Talkie has been defended this week by former City planning officer Peter Rees after it won the Carbuncle Cup, a none-too-serious competition run by BD magazine for the worst building in Britain. Rees said that you must “never judge a building by its appearance”.
What! Really? OK, fair enough. Let’s judge 20 Fenchurch Street, EC3, by metrics that joint developers, Land Securities and the
Canary Wharf Group, truly understand.
Imagine 20 Fenchurch Street as straight, all 33 office floors the same size as floor three. The effect reduces the net lettable by 193,000 sq ft, down from 681,000 sq ft to 488,000 sq ft. That extra 193,000 sq ft adds up to an extra £300m of capital value, using a rent of £70 per sq ft and a 4.5% yield. In these terms, the value of a 488,000 sq ft straight tower would be £760m.
Therefore, for adding 40% to the development value, the Walkie Talkie is hereby awarded the EG/Planet Property Gold Cup.
No mothballs on Noel
On 6 October Land Securities will be launching a sales drive for the 100-flat development at King’s Gate in Victoria, SW1.
Not that the resi team will be that happy. Earlier this month, plans to convert Portland House just up the road into 204 flats were shelved. LandSec boss Rob Noel now clearly takes the same view on the outlook for residential as he has for ages on commercial development: don’t bet the bank on the boom going on much beyond 2017, or at a stretch, 2018. Is he right?
Nobody, of course, knows. But, as with commercial development, there are far more points in being right, then restarting, than being wrong and mothballing what can’t be rented or sold.
Major’s revenge coming?
In the early ’90s Private Eye coined an extra few bob re-packaging its Secret Diary of John Major, aged 47¾ column into paperback form. In it, the former PM is ribbed continually by the public schoolboys who run the satirical fortnightly for his Adrian Mole-like lower-middle-class tendencies, such as eating his peas off a knife and tucking his shirt into his underpants.
Oh to be a fly on the wall at charity fundraiser the Story of Christmas reception on 16 December. John Major and Private Eye editor Ian Hislop are both coming along to read lessons.
