'Grossly untrue to say market has stopped'

THE credit crunch has hit the commercial property market. The banks are drawing back because of a bout of subprime mortgage-itis, with one leading commentator saying the market is in "reluctant limbo" – no meeting of minds between buyers and sellers.

But just how many banks are now reluctant to lend to the commercial property sector?

That's what William Newsom, head of commercial valuation at Savills, decided to find out with a telephone survey. It showed that only seven of the 97 lenders in the UK commercial property market had called a halt to lending to the sector.

Newsom said: "I am very surprised to find how few have withdrawn. It is grossly untrue to suggest that the market has stopped."

Newsom said that of the 97 banks surveyed, 49 said they were still lending, 29 gave a qualified "yes", 12 gave a qualified "no" and seven a definite "no".

He added: "A lot of people who said they are still lending will do so if the terms are right – they might price the debt at a level which will effectively take them out of the market. For others, if they let it be known to the wide world that they are not lending they will miss opportunities and they might start losing existing customers.

"We are in a period of considerable uncertainty but I remain positive about 2008. The acid test is the number of deals being done – and we are very busy, having received a lot of instructions."

Caroline Parker, director and head of valuation at Savills in Scotland, said there were indeed some banks not lending at present – particularly some German banks.

"Having said that, we are just doing a large commercial property development in Central Scotland and it is a German bank which is funding it. This is the first time I have seen this bank in Scotland and there is another German bank looking to get something up here.

"The traditional German banks are cautious but there are new German entrants up here and they are positive about the market.

"Sometimes those who give a negative response about what is happening in the marketplace are people not doing anything. There's still a lot of people out there who are doing transactions – those who are sceptical are those not doing deals."

David Johnston, Glasgow-based investment partner at King Sturge, said general uncertainty would continue during the early part of this year while investors wait for reassurance that the impact of the subprime lending fiasco has been fully reflected.

He said: "Banks will remain cautious and will require higher margins and generally harsher lending criteria.

"The volume of transactions will be lower than in previous years and the unitised retail funds will be selling assets to meet redemption demands and maintain liquidity at comfortable levels.

"There will be good buying opportunities, particularly for investors with equity who are willing to take medium to longer term views.

"Investors who are active will rightly focus on property fundamentals, concentrating on core established locations and decent quality properties with proven letting potential."

Another King Sturge partner, the Edinburgh-based John Clement, believes that cash buyers will be more evident in the market by Easter. He said: "Property companies that are not overly geared will be best placed to take advantage of the market re-pricing.

"Tenant demand should remain steady, and could exceed supply (particularly in Edinburgh] to create rental growth. Construction costs will begin to impact on development supply, with some schemes no longer proving viable."

GEORGIAN HOMES DEAL IS JUST CAPITAL

THREE Georgian townhouses in Inverleith Terrace, Edinburgh, have been sold for £2.25 million. They were sold by the Viewpoint Housing Association – represented by Ryden – to Heritor's Residential Property (Scotland). The property is used as a care home but is to be converted to townhouses. Viewpoint "reluctantly" decided to sell and the proceeds will be reinvested by them in a new home for older people. Heritor's, represented by Rettie, is a joint venture between the Heritor's Group and HBoS.

AN EDINBURGH tyre depot occupied by Kwik-Fit has been sold for £1.6m. Drivers Jonas did the deal on behalf of OMC Investments (formerly Nissan UK) and the depot at Falcon Road West, Morningside, was bought by a fund managed by Hermes Real Estate Management which also owns the Waitrose food store behind the tyre depot. Nawaz Haq of NH Property Advisors represented Hermes Real.

FINANCIAL services company Xchanging has moved its Glasgow HQ to 135 Buchanan Street in a deal brokered by DTZ on behalf of LNC Property Group – and this means the building is now fully let. Xchanging has swapped St Vincent Street for a 2,825sq ft suite on the third floor of the landmark building at £15.50 per sq ft on a five-year lease. Xchanging was advised by Ryden.

GLOBAL recruitment consultant Hays has signed an eight-year lease at a record-breaking square rent for Blythswood Square, Glasgow, of £20.18 per sq ft. It is relocating from a smaller office at West Regent Street, taking 2,354sq ft. Landlord Clydeport Properties was advised by King Sturge, while Mann Smith acted for Hays.

WILSON Bowden has secured facilities management company Haden Building Management as the second tenant at its flagship Glasgow office, 4 Atlantic Quay. Lambert Smith Hampton represented the developer in a deal which sees Haden, represented by Philip Silby at Matthews and Goodman, take 8,630sq ft on a ten-year lease at a rent of £25 per sq ft.

CUSHMAN & Wakefield has advised eight new tenants acquiring space at the £350m Silverburn Shopping Centre which opened in October. It has secured units for Thorntons, John David Group, Vision Express, Barratts Shoes, Phones 4U, O'Briens, Holland & Barrett and Costa.

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