Monthly Commercial Blog 

According to expert professional opinion a weak upturn in 2011 and 2012 is still more likely than a new recession, but either way occupier demand for property is likely to remain relatively subdued for some time, with below inflation rental value increases except in certain locations such as central London. Secondary retail and office locations could be badly affected.

Many businesses have faltered as a result of the tough economic climate and more expected to fail in the coming months. However our own research shows a more encouraging sign as some distressed assets are appealing to major companies and an increase in new business start ups. So all is not gloom and doom there is a strong underlying trend of growth. Economic output increased strongly in Q3, recording an above trend 0.8% growth, although weaker than the exceptional 1.2% recorded in Q2.

As we come to the end of another year there are signs of further improvement in the commercial property market with residential sales and lettings also continuing to perform better. Indeed over the last months we have seen a leap in house sales with the number of transactions reaching figure we have not seen for 3 or 4 years.

The appetite of both commercial and residential property developers is now returning and we are seeing a marked increase both in confidence and level of offers now being made.

It is now time therefore to look at your property assets and get the “ducks lined up” for the development market to return.

Do you really know what your assets are worth - now or in the future - property is valued based on how that property can be used. For example, a one acre parcel that can hold five single family homes is generally more valuable than a one acre parcel that can hold only one single family home. However, the owner of the land that can hold five homes usually doesn’t even know it. It often takes land development professionals to identify this “hidden” use (also called development potential). Since this hidden use is really just hidden value, we call it-hidden equity.

Determining whether your property has hidden equity can seem complex, time consuming and expensive, it isn’t. It often requires surveying the property, researching planning use, engaging expert advisers (land surveyors, planners, highways engineers etc) and talking to relevant local authority departments. The laws, regulations and rules that govern land development are complex. It takes an expert to determine how they apply to a particular piece of land or property. Your surveyor can normally tell you quite quickly what the potential is, planning consents and the necessary approvals will take longer but they can guide you on this.

Whilst we enter the traditionally quiet pre Christmas period it is time to consider your options and speak to your advisers, it maybe just empty office, retail or industrial space you don’t occupy anymore or it maybe land around your business, an old car park or piece of scrub land. Don’t miss out on the opportunity this may give you to swell your bank balance!!

The basic steps are ideally a well-located property, secondly add value to your property through renovations or refurbishment or redevelopment thirdly think about leasing the property - this should now be at a better rent as you have improved and added value to your property. Fourthly refinance your property, taking advantage of its increased value because you have bought well and added value.

Now there are two fundamental strategies that will help you, firstly think like a Developer, just to be clear, this doesn't literally mean being a developer, because that just doesn't suit everyone. What I mean is to constantly 'think like a developer' and look for ways to add or "create" value, in order to maximise the return on your investment.

Buying a property that needs work, refurbish it and this can immediately increase its market value. There are always rundown properties on the market and they scare off the average buyer - but they could be just perfect for you. These types of properties are much, much harder to find nowadays. In fact, there is strong competition for well-located properties with strong upside potential in the more affluent areas.

The second key, refinancing and don’t sell, too early. By selling to quickly you may "kill the goose that lays the golden egg". Someone else now owns the property and gets all the benefit of the long-term capital gain.

Lastly with the current state of play in Planning Consents is somewhat confusing and with the emerging localism agenda it is time to be clear and not let this fetter economic growth and new development – nimbyism is not solution we must look deeply into our area and allow the regeneration and redevelopment to take place to protect our future economic prosperity – it is time to act !!

Don’t be put off by what seems a complex series of steps and don’t underestimate the value of your property, find out from your expert advisers.
 

Alan K Knight FRICS

Head Of Commercial

Walton and Hipkiss – Stourbridge

01384 397 797