Looking at the outlook for debt buyers Gresham Down says that the number of active lending banks has fallen from 25 to no more than 10-15 currently, with most reluctant to lend on all but core product. Accordingly it believes yields are already softening on both non-prime stock and larger shorter dated single let transactions of over £100m.
Gresham Down has calculated that there is more than £6.5bn of commercial property for sale across Central London. The City represents the largest element with £5.02bn while the West End total is £1.56bn. Looking forward it sees the trend of banks selling or encouraging their borrower clients to sell “accelerating with further stock being added from owners looking to take profit on purchases made within the past 2 years and from maturing loans within CMBS portfolios.”
The advisor notes there are currently £1.43bn of investments under offer in the City and £1.08bn in the West End. It says investment turnover for the year to date is currently £4.17bn for the City and £3.33bn for the West End which represents an increase of roughly 33% compared to 2010.
Gresham Down is strongly recommending that equity buyers “position themselves on sales that are vulnerable to future pricing movement and on buyers who have to sell, such as banks and owners under pressure”. On the selling side it is telling vendors that they “should be increasingly aware of counter-party risk from debt-based buyers and focus on equity buyers, even though these bids may be at lower levels”.
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