- Despite well-aired concerns centered on the economy, the property market in our area
is now functioning at a reasonable level. Hot spots of activity have emerged in response to attractive deals on offer for occupiers and to the expansion of recession focussed businesses.
- Property investment continues to offer relatively attractive returns given pricing and yields in other asset classes, although risk of all kinds is being priced very aggressively.
- The ongoing reduction in available city centre Grade A office space has yet to translate into new development, as development funding remains scarce. It can only be a matter of time before investors focus on some of the attractive speculative funding opportunities which are beginning to emerge, particularly in Glasgow.
- Following the successful sales of the Kenmore and Kilmartin portfolios to a number of investors, further administrations and portfolio disposals are expected as the banks seek to exit from distressed situations. However, it is anticipated this will be phased to avoid flooding the market.
- As the two big traditional lenders to Scotland’s property sector – Bank of Scotland, through new owner Lloyds Banking Group, and Royal Bank of Scotland – continue to focus on repairing their balance sheets, a gap has been created for new entrants. Barclays and HSBC have said they are keen to do more lending, and there are a few others who see the current market as an opportunity.
- The consolidation of the property investment market is set to continue over the next six months. With limited if any development of new stock, rental improvement is inevitable. It is envisaged that the return will be made up principally from income return with possibly some capital growth stemming from emerging rental value growth.
- Scotland’s recently announced budget cuts (-7%) provide some protection for capital projects, boosting prospects for construction and economic recovery. A pay freeze proposal should protect employment and consumer spending. Uncertainty remains however due to Holyrood elections in May 2011 and the short term nature of the budget proposals.
For more information visit www.ryden.co.uk
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Ryden Team
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Investment Deals
Kenmore Industrial & Office Portfolio
Following the administration of property company Kenmore, the portfolio owned by them in a joint venture with HBOS was broken up to be sold. We monitored the office and industrial properties for a number of months on behalf of a client prior to them coming to the market, and subsequently provided detailed market and asset management advice on the six properties located in Scotland. Our client eventually secured the entire UK portfolio of 25 properties, in a competitive bidding situation, for an offer in excess of £90 million.
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Goodricke College, York
In one of York's most significant transactions in the last year, Ryden and Pinsent Masons advised property investor Evans Property Group in the formation of a joint venture with the University of York to own and run the new 589-room Goodricke College. The innovative multi-million pound deal allowed the university to free up funds to develop its estate, invest in student accommodation and maintain interests in Goodricke College while sharing ownership with an investor.
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Denmore Industrial Estate, Bridge of Don, Aberdeen
Tritax and Cedarwood Asset Management recently completed a second acquisition within their new industrial property joint venture. The property, a multi-let terraced unit estate of 4,933 sq m, was purchased for £4.2 million reflecting a net initial yield of around 8%. Ryden identified the opportunity presented by a strong local economy and the potential for further rental growth through implementing various asset management initiatives.
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