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DO
YOU KNOW WHAT YOU ARE SITTING ON??
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There are signs of further improvement in the commercial
property market, with residential sales and lettings
also continuing to perform better.
Britain’s commercial property markets delivered the largest monthly
capital growth since June 2006, at 1.1%, according to
the Investment Property Databank. This increased pace
of market acceleration brings third quarter growth to
1.2%.
While the monthly capital growth figure is the largest
in more than three years, it was contained by
continued pressure on rents, hopefully this will
improve as occupier confidence returns in the new
year. Yield impact, which measures the influence yield
movements have on capital values, was 1.75% – the
strongest positive figure since December 2005.
Tesco’s plans for Stourbridge are moving forward and
the long awaited change in the fortune of Stourbridge
Town Centre seem to be within grasp.
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.
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. (703
words)
Alan K Knight FRICS
Head Of Commercial
Walton and Hipkiss – Stourbridge
01384 397 797 |
