All shapes and sizes

When is a corridor not a corridor?  When it’s an arc. What’s the difference between a cluster and a hub? Nothing material.

The terminology used to characterise what’s going on in any one area of our eastern region serves only as useful shorthand. What matters is what is actually going on inside this corridor, arc or even valley. And the past summer has seen some action in this regard.

The London-Stansted-Cambridge Consortium has been focusing on how the devolution of powers could contribute to pumping-up and serving the growth potential of this corridor to and from London in the coming 20 years.

The London School of Economics (LSE), in suggesting a serious review of the Green Belt around London, referenced the London-Stansted-Cambridge corridor as a pilot for the LSE’s idea of complementing growth corridors with green ‘wedges’ as part of a new view of the Metropolitan Green Belt.

Meanwhile the National Infrastructure Commission (NIC) – which was launched last November – sees a corridor of growth between Cambridge, Milton Keynes and ‘the Other Place’: Oxford.  With a focus on the disjointed road and rail connections between these three key locations, the NIC is charged with recommending improvements and solutions that will assist in supercharging transport links to reconcile the two old and the one new city.

Taking Cambridge alone, the ‘growth but where?’ debate has continued over the summer – and will doubtless do so well in to the coming if, somewhat stalled, autumn season.  The City Deal has been considering how best we can transport the current and future population of Cambridge through and around its historical, geographic boundaries.

All these august bodies are taking a strategic view for future growth. Meanwhile, over the summer, growth is actually going on with new development either rising up out of the ground or taking firmer shape through the planning process.

A round-up of summer site action reveals housing as key to unlocking support for developments on a number of projects.

Jesus College’s proposal for a new business park ‘Cambridge South’, on the city’s southern fringe by the M11 motorway, includes a significant housing element.

A new sporting village in Trumpington – promoted and proposed by Grosvenor Estates - includes plans for 520 new homes, of which over half could be built in the coming five years.

Plans for the re-purposing of Waterbeach barracks as the basis for a new settlement - on the same lines as Northstowe - have moved a step forward over the summer.  Homes for occupation as early as 2019 are being mooted by the promoting developer, Urban & Civic. 

Meanwhile over at master developer Gallagher Estates’s Northstowe, housebuilder Bloor is on schedule for completions on the first phase of brand new homes in early spring 2017.   The school building at Northstowe has had life breathed in to it this autumn term by primary school pupils from nearby Longstanton whose own school is being extended and renovated to cope with a growing roll-call in the catchment area.

And, as schools returned, Brookgate revealed its plans for homes as part of a mixed use’CB4’ development to complement the new railway station at Cambridge North.

Perhaps the biggest of all the summer developments front – although without a residential housing element - was the granting of outline planning consent of the second phase of 23 acres at the Cambridge Biomedical Campus.

Call it a cluster a hub, an arc or a corridor, this summer has seen the next chapter in the history of this ancient city and its sphere of influence take shape.

Will Mooney MRICS
Partner
Commercial, Cambridge

Don’t frighten the horses

Commercial property rarely makes for mainstream headline news and we’re thankful lfor that as we quietly get on minding our own and our clients’ business. We occasionally stick our head above the parapets at either end of the year with the annual round of reviews and forecasts but that’s about it.

At the outset of this year, commercial property professionals and pundits were in broad agreement that yields had most definitely peaked and that the volume of transactions we’d been enjoying were unsustainable and that total returns were set to fall – my own firm pegged the fall to 8.8 per cent. So far so predictable in Q1 and Q2 2016 then.

However, before the third quarter of the year had properly got underway, commercial property came crashing in to mainstream media headlines for five days in a row and not in a good way. I say ‘commercial property’ but what actually made the news was the suspension and closure of a number of funds which were invested in commercial property.

It was the funds that were falling down, commercial property is still standing. Alongside other property interests, thankfully. Expert property commentators and analysts were - and still are - at pains to point out that a commercial property fund is an investment vehicle and one not for the faint-hearted either. In the close world of any niche investment funds, it is easy for contagion and a herd mentaility to take hold.

Investors in all sorts of funds are getting spooked and some of those whose portfolios include commercial property funds are wanting to liquidise their investments and move on to other funds and other asset classes. Commercial property investment fund managers were left with little option but to suspend the funds while they sell the asset. It can take a long time to sell an office block, business park or a retail outlet, believe me.

The thought of Brexit has, understandably, made many people twitchy – just look at the pre-poll rock solid political careers it has ended but now some new careers have begun too. While the matter of the prime ministerial succession and the timescale has been settled earlier than first assumed, the financial markets reacted to uncertainty.

In those first weeks post-24 June along with the value of sterling falling, FTSE companies most exposed to UK business interests saw their share price drop more than those with more international exposure. There was much mention of housebuilders’ shares falling as if this was proof of a mass property Brexodus.

To make a connection between the closing of commercial property investment funds and a potential housing market crash á la 2009 is crass but some reporters whose business is not, ordinarily, the reporting of business can be forgiven in not appreciating the very clear distinction between commercial property and residential property.

Investors in the housing market in the UK are, in the main, those who live in their investment. The forces driving commercial property investment funds are very different from those governing the housing market, namely a fundamental shortage and a low interest rate environment in the case of the latter.

The economic and financial expert view is that whereas the credit crunch of 2008 and 2009 was a financial crisis with political ramifications, what we are experiencing now is quite the reverse.

Setting aside on what the actress Mrs Patrick Campbell was commenting when she said it, I am minded to agree with her when it comes to the present situation: “My dear, I don't care what they do, so long as they don't do it in the street and frighten the horses.”

Will Mooney MRICS
Partner
Commercial, Cambridge

Regions to be cheerful

Will Mooney, Carter Jonas partner and head of commercial and professional services in the eastern region, ponders the politics of the powerhouses.

The recent Budget statement acknowledged the potential of regional powerhouses and the considerable heft that economically successful regions contribute to the national and international performance of the UK.

Not before time. On the face of it, there appeared to be positive policy initiatives which could be good for the eastern region and spending plans for the kind of things for which this region – if you consider Cambridge as the heart of the hub - is known and recognised.

There will be £11 milllion to invest in new technology incubators to be channelled through Tech City UK – the government body which funds technology clusters. A £40 million pot will assist with research in to the ‘Internet of Things’ which, in his speech, the Chancellor rightly identified as the next stage of development in ‘the information age’.

Then there was the potential of a deal whereby 100 per cent of growth in additional business rates could be brokered for and kept by local authorities in areas like Cambridge, among others. This was described in the speech and in the subsequent media coverage as a ‘roll out of the Manchester model’ and a key component in formulating a northern powerhouse which sees Manchester and Leeds at the metropolitan heart of this hub.

Naturally enough, many in business in this region gave what is couched as a ‘cautious welcome’ to this and other elements of the Budget and for understandable reasons.

It is churlish to say it, but there has been a full-on eastern powerhouse for the best part of 20 years and does the powerhouse model, in modern times, really orginate in Manchester? We’re a long way from the heyday of the wool trade in which industrial Manchester was the centre of that economic power push.

Equally, one could argue that at a county level, never mind a regional level, there are issues of disparity and identity with which we struggle here in a way that a northern powerhouse might not. Although try telling that to the Houses of York and Lancaster.

In Cambridgeshire, there is a marked distinction between the north and south of the county; try lumping Ipswich in with Norwich and you won’t be popular; locations in Hertfordshire and Essex which border London have more in common with each other than their country or coastal county compadres. And whither Lincolnshire and Northamptonshire? Arguably, the former has more in common in its southern rump with north Cambridgeshire and the latter, a compatability with the Oxford corridor.

While government and civil service assistance to provide the broad policy and economic framework and infrastructure in which any region can seek to prosper is to be welcomed, it is questionable whether direct intervention - some might say interference - in trying to impose a regional identity and common cause is the best use of their time in the modern age.

After all, the latest detailed study of the genetic sources of the UK, has identified that there are 17 dominant genetic clusters which tend to reflect the de-facto, regional identities, not bureaucratic boundaries, within our nations. The largest of these clusters covers southern, central and eastern England and dates back to the the collapse of the Roman Empire when Angles and Saxons settled here.

Will Mooney MRICS
Partner
Commercial, Cambridge

Cambridge granted 100% control of business rates

“The Cambridgeshire business community is delighted with George Osborne’s announcement that the county can now claim 100% control of its business rates. This will allow the local councils to realise their ambitions and further invest in much needed infrastructure for the county’s burgeoning population due to the influx and expansion of major global firms in the area such as AstraZeneca and ARM Holdings.

Cambridge’s GVA forecasts highlight the city will out-perform the UK national annual figure for each of the next ten years. The city’s rate of GVA growth is also predicted to steadily increase over this period, highlighting the continued out-performance of the Cambridge economy when compared to the national level.

With biotech, education and Information & Communications Technology (ICT) sectors conglomerating in and around the city, we praise the Chancellor’s decision to grant this opportunity for Cambridge to continue to reinforce its position as an economic powerhouse.”

Will Mooney MRICS
Partner
Commercial, Cambridge

Conscious uncoupling

Will Mooney, Carter Jonas partner and head of commercial and professional services in the eastern region “There is nothing permanent except change”, Heraclitus of Ephesus 535BC-475BC

I guess the works of the ancient philosophers have endured because they always seem to have a really good handle on modern life, don’t they? In mixing my ancient civilisations here, as the two-faced month named after the Roman god Janus ends, it seems to have rung in a mood of change – the mood which will surely go on to charactertise the rest of the year, as it does any year.

Divorce lawyers will confirm that January is good for business. It’s a month in which couples whose relationship has been rocky appear ready enough to confront the reality and initiate a change, whether permanent or temporary.

January this year saw Hollywood actor Gwyneth Paltrow admitting she regrets having used the phrase ‘conscious uncoupling’ when, last year, she announced that her and pop-star husband Chris Martin were divorcing. Yet, it’s an eloquent phrase impying, as it does, a grown up approach to unhitching in the way that ‘divorce’ has come to suggest something a bit more acrimonious.

In early January, the Swiss National Bank unhitched the Swiss Franc from the Euro. The following week Denmark was tipped to do the same with its Krone in anticipation of the European Central Bank (ECB) announcing a programme of Euro quantitative easing (QE) to alleviate the debts of certain Eurozone countries. The ECB having finally convinced Germany of the advisability of QE in the face of mounting disquiet and political unrest, particularly in those bailed-out Eurozone countries.

It’s been the month in which the battle of the supermarkets played out badly for two grocers occupying the middle ground. A pincer movement from food retailers at the premium and budget ends of the trolley park saw Dalton Philips step down as chief executive of Morrisons. In the same month, the last boss but two of Tesco came out in public to criticise his own immediate successor who, himself, had already resigned in July 2014.

In an interesting aside, on the theme of coupling and uncoupling, I read that a Cambridgeshire couple are planning to have their wedding reception in the café of their local branch of Morrisons in Cambourne - circumstances meant it was a frequent venue during their courtship.

In the week leading up to Burns Night on 25 January, proposals which could ramp-up the next phase of Scotland’s devolved powers were published for consultation. This is part of the phased fallout from Scotland rejecting to consciously uncouple itself from the Union in September last year.

Surely the most frenzied activity to couple or uncouple on the UK dating scene this year will be pre and post-General Election on May 07th. The blue and yellow members of the coalition have already embarked upon a fast track separation in talking about the differences in the coalition in party terms where once it was the coalition consensus that mattered above all else. Let’s hope any powerbroking in the absence of a workable majority administration will once more see peace and harmony in the Rose Garden of Number 10 soon after polling day.

With polling pundits calling a hung parliament, it’s been over 40 years – 1974 - since there have been two General Elections in one year here. How the times have changed since then.

Will Mooney MRICS
Partner
Commercial, Cambridge

Splurge, purge and debt

Setting aside the peculiarity of making an Autumn Statement in early December, the dust has settled, for the time being, on the brouhaha which accompanied the Chancellor of the Exchequer’s latest diagnosis and prescription to remedy the financial ills of the nation.

The country is riddled with debt and it needs to be cured by short and mid-term pain for long term gain it seems.

It is politically acceptable to talk about the national debt again in a way it probably hasn’t been since the 1970s. Then, we were all about the Public Sector Borrowing Requirement and inflation, the 3-day week and the winter of discontent.

All the mainstream Westminster parties - and those aspiring to become so after the next election - are no longer embarrassed to mention the ‘D’ word again. And not only to talk about how indebted we are as a nation, but also to set out their stall as to how we can decrease this public debt.

It is okay to talk about repaying our debt, even if in repaying it what we actually mean is reducing the cost of servicing it.

In the fiscal year 2018-2019, implementation of the Government’s current programme will see us save £18 billion in interest payments. Borrowing is falling. Next year it will be £75.9 billion, falling from £91.3 billion this which, itself, has dropped from last year’s £97.5 billion.

We are aiming to be in the black to the tune of a £23 billion suplus in 2019-2020 but we are cautioned it could get messy in order for this to be achieved. Being in the black is a laudable business aim.

While it’s fine to talk about our national debt and how we can repay it, it’s still not fashionable to talk about our private debt in polite company as that’s even messier, but we have to start somewhere.

Tucked away in the detail and the in-depth coverage of the Chancellor’s statement was notice of our intention to pay back or, at least try to clear, the nation’s historical debts – some of which date back to the early 18th Century.

The refinancing of World War One debts in 1932 took the form of a bond replacing a gilt which was first issued in 1917. Now - well ,on 09 March 2015 to be precise - the British Government is set to redeem this bond which, in total with other war bonds since the penultimate year of the Great War, has cost £5.5 billion pounds in interest alone.

HM Treasury has made it known that it is the intention to repay, at the appropriate point, ‘legacy bonds’ which shored up borrowings against other expenses incurred during our nation’s history.

Some of these bonds and gilts financed the Napoleonic Wars, the setting up of the Bank of England and the clean-up when the South Sea Bubble burst and rocked the finances of the country in 1720.

Which, if any of these specific, perpetual debts are to be revisited have yet to be confirmed in detail but the fact that we, as a nation, are beginning to address our nationalised indebtedness tells the story of our times more than of those past.

Let’s hope we’ve eaten, drank and been merry in the past few weeks; for next May, we vote.

Will Mooney MRICS
Partner
Commercial, Cambridge

City-state of the nation

With Scotland’s electorate deciding if it feels better together or not in September, Will Mooney, Carter Jonas partner and head of its commercial agency and professional services in the eastern region, wants to know if smaller can be better.

Early in July, the Government announced the release of the first tranche of a big pot of £6 billion of cash for the English regions. With an eye on being better together and although the phase 1 £12 billion is very much for England, the Prime Minister heralded Growth Deals as ‘...a crucial part of our long-term plant to secure Britain’s future.’

In this first phase, £71.1 million is allocated to what’s termed the ‘Cambridge Corridor’ for projects which include transport and science and technical innovation centres. The day after the Government’s announcement, the Cambridge Ahead organisation said that the £13 billion economic powerhouse that is Cambridge needs to be on its guard as its top business talent can be enticed away to London because of, among other things, Cambridge’s poor transport infrastructure and paucity of night time entertainment.

Cambridge Ahead is looking to pitch Cambridge as the ‘pre-eminent small city in the world.’ It’s a flight of fancy on my part but perhaps Cambridge could make the case for city-state status like that of Singapore, Andorra or Macau? Or those classic city-states of Rome or Athens?

Too landlocked, perhaps, for parity with the city-state of medieval Venice, there would be there would be no shortage of candidates for The Doge of Cambridge as there are plenty of shrewd citizens and the modern equivalent of rich merchants. The great buildings of Venice see themselves reflected in the palaces of learning which are the University Colleges. So influential is the business success of Cambridge, that it could make a claim for sovereignty and overlordship over adjacent counties which is a pre-requisite characateristic of historical city-states.

Of course, this idea must be treated with the levity it deserves but Cambridge continues to reinforce its position as the most commercially influential location in the eastern region. Rather than city-state, perhaps there’s a case to be made for ‘city-region’?

It is regional causes and cases for investment and development which are the cause celebre this summer and beyond, in all probablility – and not only with the policy-makers but with policy influencers too.

The RSA City Growth Commission (thersa.org.uk) published a report in July called “Connected Cities: The Link to Growth”. The report references city-regions but prefers to use the term ‘Metros’ in arguing that individual cities , such as Leeds, Manchester and Sheffield, should have the freedom to operate as collective metros to make their own decisions when it comes to infrastructure investment.

In not relying on centralised decisions from Whitehall about what’s best and how much is best for its metro, the report makes the case that this devolved approach in England would see a counterbalance to the dominance of London and the South East. In turn, this would be in the best interests of the whole of the UK’s economic growth and chances of prosperity being spread geographically to all our benefit.

In the early autumn, the UK nation state faces the prospect of losing its most northerly part but such is the jigsaw of our country that there are rumblings in Orkney and Shetland that perhaps they have more in common with their Scandanavian counterparts than with Scotland’s central belt and its kingmakers at Holyrood.

Will Mooney MRICS
Partner
Commercial, Cambridge

Property Investors Return With Confidence

The year has been heralded as one in which investor confidence in property will return in earnest. Rural property peers have pointed to the ‘froth’ skimming off premium agricultural land values this year as property-minded investors return with more confidence to the more obvious residential and commercial sectors for the first time post-credit crunch.

But, in the commercial sector, it’s by no means the wholesale return of investor confidence in any commercial property opportunity and the smartest money is always ahead of the game in the smartest of locations.

Last summer, Cambridge greeted the news that Tesco Pension fund is backing developer Brookgate’s 65,000 sq ft Grade A building which is at the heart of the cb1 scheme. But this five storey building was already pre-let and pre-let in Cambridge is always going to be a sure-bet.

In places like Cambridge, where there are limited opportunities in a smattering of its remaining key strategic locations, funders have been prepared to invest on very specific terms for the past three years. The terms usually involve pre-let agreements, more often than not with blue-chip companies and with certainty of long term leases.

Given the limited and ever diminishing supply of commercial sites with viable opportunities in Cambridge, those which exist are big ticket items and so it’s the cream of the funders who are attracted here.

With forecasts that the development pipeline will be reduced by more than 25 per cent by the end of this year, there’s concern about future opportunities for commercial property investments.

Investors like to look ahead and stay ahead but it’s getting more and more difficult to point to the next tranche of Cambridge sites looking for funding. Land which is supposed to see the city through to 2030 is already coming in to the calculations and commercial allocation.

With so much current building activity in Cambridge, it’s difficult to convince a lay audience that there’s a paucity of sites in supply on the near horizon but it’s one we will have to face – and soon.

The year 2014 is going to be a big one for those with development and property interests here.

This year sees Cambridge City Council and South Cambridgeshire District Council’s Local Plans firming up with the identification of residential and commercial site allocations to take the area through the next couple of decades.

At the end of this month and in the early days of February, we welcome in the Chinese Year of the Horse. People born in years of the horse are believed to be active and energetic and, work wise, they refuse to give in to failure but, add the astrologers, ‘their endeavour cannot last indefinitely’.

In a twelve year zodiac cycle, the next year of the horse in 2026 - property investment funds are already backing Cambridge sites that are four years in front of that horse.

Will Mooney MRICS
Partner
Commercial, Cambridge

The Generation Game

Unable to find his name on the latest rich list rankings again this year, Will Mooney, Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, seeks solace in the wise words of one who knows.

Those of us who are parents acknowledge that we’re blessed with, in equal measure, life’s greatest treasures and the biggest drain on finances. For parents fortunate to have wealth – however meagre and diminishing - to pass on to the next generation, we fret about how to do it responsibly. We don’t want to indulge but we’d quite like to ensure we’ll be remembered fondly by successive generations.

A report published by insurer LV= earlier this year, entitled Cost of a Child:From cradle to college 2012, pegged it at around £218,000 but that is just to the child’s 21st birthday.
While my children are younger than that presently, those parents I know with post-university age children would love to have stopped subsidising their children at 21 or at the £218,000 threshold, whichever came first.

So when consoling myself that Clan Mooney had failed to make it to the Sunday Times’s rich list again this year, I came across some words of wisdom from one of the world’s richest men: Warren Buffett is quoted as saying, on the matter of inheritance, “Leave your children enough to do what they want but not enough to do nothing.”

But what’s enough? And what’s considered doing nothing? Socialite, fashion designer and heiress Petra Ecclestone - one of Formula 1 supremo Bernie Ecclestone’s daughters - has complained in a published article that she feels she isn’t recognised enough for her hard work starting with the feat of getting up in the morning.

She’s been ridiculed but she does have a point. As the owner of a 14-bedroom mansion in Los Angeles and six storey mansion in Chelsea with attendant entourage to see to her every need, why should Petra bother doing anything at all?

None of Ecclestone’s children appear in the frame to take-up the family business of running the Formula 1 circus. This is entirely in keeping with the archetype of first generation entrepreneurship.

First generation entrepreneurs who create substantial business wealth for the first time in their family’s history, tend not to pass on their business unless there is a child who shows not just ability but exceptional ability. They are very protective of the business that has created the family wealth. The same kind of protective instinct means they want to cushion offspring from having to put in the hours of hard graft that were needed to make the business the success it has become.

Apparently by the time you get to the third generation and beyond of any inherited wealth which originated from entrepreneurship, capability has been succeeded by the need for equality when it comes to divvying up the spoils among the family and also the business itself – if it’s still going.

While living among entrepreneurs in Cambridge and being in a business which benefits directly from their wealth creation locally, I make no claim to be one. Also, having never been the heir to a substantial family fortune, I don’t seek recognition for getting up in the morning to earn a living.

Apologies to my children on these two counts.

Still, I’ll never have problem of selecting which one of them, if any, is capable enough of taking over the entrepreneurial reigns from me. They, in turn, will thank me that, unlike Petra Ecclestone, they won’t have to decommission a gift-wrapping room in one of their mansions because they were useless with ribbons.

Will Mooney MRICS
Partner
Commercial Cambridge
T: 01223 558032
E: will.mooney@carterjonas.co.uk

Brazil: a tough nut we need to crack

Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, is not the only Britain who’s nuts about the Latin American country’s economic ascendancy.

Brazil puts the ‘B’ in the mnemonic BRIC as one of the darlings of the developing economies alongside Russia, India and China.

It’s a country top of mind of this country’s elite. Not only did the third in line to the British royal throne visit Brazil with a delegation in March but it also got a mention at the dispatch box in the House of Commons when the Chancellor of the Exchequer delivered his Budget statement.

It’s no wonder. March saw this Latin American nation overtake us in becoming the sixth-biggest economy in the world - growing by 2.7 per cent last year whereas UK growth was 0.8 per cent.

In such a vast country of topographical contrast, Brazil’s economic boom is down to high food and oil prices. It’s now the world’s ninth largest oil producer and its government aims for a top five ranking.

The UK is Brazil’s fourth largest foreign investor and the George Osborne was clear in his Budget speech in saying we’re looking to create a climate for export finance which will support our smaller firms in such new markets as Brazil. He also - in contrast to previous default positions of western states of old - was pointed about not wanting ‘protectionist rhetoric’ which, in the past, would have seen a regime of tariffs and heavy protection of currencies in challenging economic times.

Much has been said of the growing gap between rich and poor in our country, with predictions that austerity measures will see this gap increase. With a growing economy, Brazil has seen a decline in absolute and relative poverty in the past ten years, during which time the poorest half of a total population of circa 190 million saw incomes grow by up to 60 per cent.

The source of that statistic tells its own story. It’s Brazil’s Getulio Vargas Foundation which some in the foreign policy field regard as one of the world’s top five policymaking think-tanks. It has links with partner educational institutions such as Harvard Law School, St Petersburg State University, London Business School and, closer to home in our region, Cranfield University.

HRH Prince Harry was in Brazil for the Rio de Janeiro launch of the GREAT campaign which is part of the Government’s drive to capitalise on the international spotlight we’re in this year in not only hosting the Olympic and Paralympic Games but it’s a year which sees the Queen’s Diamond Jubilee.

The GREAT initiative’s Rio launch was anchored around a £25 million campaign to encourage Brazilians to visit the UK. GREAT will see campaign launches in Mumbai and Shanghai too.

British brands on display at the launch included Bentley, Aston Martin, Burberry and Stella McCartney, who is both a brand and the fashion designer responsible for the Olympic wardrobes of Team GB.

Indeed, we pass on the Olympic baton from London in 2012 to Rio de Janeiro in 2016 and, in between, Brazil hosts the 2014 FIFA World Cup.

Even though Horse Guards Parade on Whitehall is the scene for the beach volleyball Olympic event, it’s a world away from Ipanema or Copacabana. But wouldn’t it be inspiring to think that, alongside some of the 2,000 plus tons of sand scattered across the London landmark for the event, some of that Brazilian economic fairydust might be mixed in so we can maximise the chance to shine that this summer will bring Team UK plc? .

Will Mooney MRICS
Partner
Commercial, Cambridge

MIPIM - glamorous surroundings, serious intent

If you are a reader of a certain popular Sunday paper, you will have learned that MIPIM, the international property conference which takes place in Cannes each March, is a place where local authority councillors go to swill champagne at the ratepayers expense and most men spend the rest of the time, when they are not swilling champagne, in the arms of the many prostitutes that allegedly flock to Cannes for the MIPIM week. I must admit that the article made me feel a bit inadequate. I certainly have had the occasional glass of champagne at MIPIM and, even more occasionally, have had a glass or two with local authority councillors, although it is normally beer, but, in all the 13 times that I have attended MIPIM, I have never once knowingly talked to a prostitute. I think I saw one once – well two actually – when two statuesque and very attractive blondes with a heavily muscled minder appeared to be working the foyer at the Carlton Hotel, but even now I am not sure.

It is true that MIPIM takes place in wonderful surroundings – glamorous villas, luxury yachts and 5 star hotels – with delicious food and drink, but the vast majority of attendees go there to work very hard. The rather pathetic article in the Sunday Express is an easy one for a lazy journalist to write but I remember a few years ago, sitting beside a journalist from the Yorkshire Post at a dinner hosted by Bradford Council. I asked him what he made of MIPIM. “I came here to write an article about local councillors spending the ratepayers money on a champagne junket in the South of France” he said. “But, having seen how hard they have worked, the real contacts they have made, and what they have achieved for their area, that is not the article I am going to write at all”. It is a brave decision for a local authority to attend MIPIM, particularly when times are hard and Government cuts are affecting every authority in the land but it is a hugely worthwhile investment in the future of their area and an unrivalled chance to engage directly with investors, and those who direct investment, to ensure that opportunities for growth – and jobs, and housing – are given the best possible chance of success.

So what was the mood of those of us who were concentrating on the UK property market for 2012 and beyond? The overriding impression is that there is a huge amount of equity available to invest in opportunities, but very few opportunities which match the risk criteria of those investors. It is rare for an agent to be so popular but with the many developers desperately seeking opportunities to invest, anyone who might be able to source those opportunities was feted. The real challenge , and possibly therefore the opportunity, comes on the debt side. In the heady days of 2005 – 2007, a huge amount of debt was written on property transactions normally on a 5 – 7 year term. In the next 2-3 years, some £135bn of this debt is coming up to be refinanced, and many of the traditional debt lenders are out of the market. That, coupled with the more stringent requirements to be imposed on the banks by Basel III, means that banks can no longer ‘pretend and extend’ so we are beginning to see the first signs of new debt providers – the insurance companies, equity funds and the like – coming to the market. So the second most popular people at MIPIM seemed to be those who have access to that debt. The by product of all this of course is that there is a greater likelihood that much of the property which has been locked away under the control of the banks, because low interest rates and outstanding debt exceeding value have made bringing property to the market very unattractive, might actually now start coming to the market – and whilst this potential flood of properties might have a significant downward effect on property values in the short term, it is a real time of opportunity for the well funded developer that has the skill and innovation to bring some of these neglected assets back to life. It is going to be a painful time for some of those banks though, because they are going to have to take some fairly serious further writedowns before they come out the other side.


Chris Haworth
Head of Commercial Division
Commercial, Cambridge

T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk

Keep Focused on What You’re Good at and That Should Keep you and Your Business Interests Smiling

In the musical Annie, the wee orphan girl sang ‘You’re never full dressed without a smile”. I can’t recall whether this was before being taken under the wing of Daddy Warbucks but, with or without finding my own millionaire patron, I’m determined to be more positive this year.

It doesn’t come easy to those of us on the genetically dour side of the Celtic tracks. But, one month in and my disposition is still sunny. Apparently, being - or at least appearing outwardly happy - is in-vogue now too.

While the Duchess of Cambridge has a lot to be genuinely happy about, she positively beamed forth with teeth-showing and dimpled cheeks on the front cover of January’s Tatler magazine. I’m also advised that models in adverts for luxury brands Mulberry and Chanel have dropped the moody pouts in spring campaigns, whereas Bally’s models are giddy with giggling and goats in the shoe brand’s latest shoot.

While it’s not exactly mirth, my sustained positive outlook is kind-of puzzling given the relentless churn of bad economic news that just keeps on coming.

I still went to bed in a good frame of mind at the end of a day last month which saw £5 billion wiped off the share value of a company which has been the 6th largest property seller since 2007 and which is also a significant tenant and contributor of rent to some of the country’s biggest commercial property companies.

I’m talking Tesco.

It wasn’t that I was positive just because I had sealed a deal with Sainsbury’s on a unit in Cambridge at the end of last year – I’m not naïve. The ‘model’ supermarket not performing indicates it’s not rosy for the others who’ll surely follow in Tesco’s wake come the reporting season.

Yet one person’s bad news gives somebody else a lift.

On that very same January day, when the Royal Bank of Scotland announced the shedding of 3,500 jobs, it saw its stock rise by 5.5 per cent. Mixed blessings for those employees facing redundancy yet who are also UK taxpayers and thus RBS shareholders of 82 per cent’s worth of rising shares.

Boil down the analyses and commentary on the bad fortunes of Tesco and RBS and it seems that, at the core, each company had moved away from the essence of good business and that is knowing and doing what you’re good at.

Tesco CEO Philip Clarke admitted that the supermarket’s focus on expansion beyond UK shores had been a distraction. This and a seasonal price drop in-store which it had adopted as an alternative to its usual, more targeted ‘couponing’ of its loyal customers had contributed significantly to its falling fortunes.

Equally, the expert view of RBS is that its desire to divest itself of its high stakes investment banking activities will bring nothing but good. Its pre-bail out activities had diverted RBS from what it was really good at - being a very fine high street retail bank whom its Scots customers always use to refer to with affection as ‘The Royal’ as opposed to its auld enemy on the high street, the plain old ‘Bank of Scotland’.

So what’s the lesson? Keep focused on what you’re good at and that should keep you and your business interests smiling.

Will Mooney MRICS
Partner
Commercial, Cambridge

Not playing the blame game

Imagine a media interview in which a politician, in under eight minutes, managed to not only answer two interviewers’ questions but appeared to be without the yolk of partisanship in clearly setting out how a country could, step-by-step, find its way out of recession through central government policy.

The politician being interviewed came from a Euro-currency country but he bore no bitterness towards his more powerful northern European neighbours, nor grudges toward his southern Euro-counterparts. He was very much not in the blame game.

How refreshing but it’s probably no surprise to anyone who has done business in the politician’s country. It was Mark Rutte, the Minister-President of the Netherlands– equivalent to the UK’s Prime Minister.

He spoke clearly and openly about his country’s growth strategy which seemed remarkably similar to what many people in this region and other UK hotspots targeted for growth have been urging as the way forward.

Rutte’s strategy for the Netherlands is to focus on the innovation, creative and technology industries, aligning the universities with business and vice versa at the earliest possible opportunity.

The Dutch Minister-President was being interviewed in Manchester - another great university city with a science focus through UMIST, its university’s institute of science and technology – where his delegation had been visiting a number of SMEs in the creative and innovation industries, as well as sharing thoughts on transport.

Not by coincidence as these things play out, the previous week, forty business leaders from the Netherlands had been on a fact-finding mission to Cambridge and had met several of our academic, business and civic luminaries including Prof Alan Barrell, Dr Hermann Hauser and the Mayor of Cambridge.

You would think that at such a time of crisis for his country’s currency, that as a political leader, Meneer Rutte would be grandstanding about the need for financial institutional reform, taking a view about the role of the European Central Bank and, as a politician, he surely wasn’t going to resist having a pop at some of his counterparts?

Not a bit of it. In fact he admitted he wasn’t a fan of huge institutional debates.

Instead he coolly and calmly outlined his roadmap for growth which he summarised as getting public finances in order, taking away hurdles for new business, making government smaller and getting the universities involved as quickly as possible in business life to get development from innovation.

The Dutch leader felt that it was important for him to get in to the thick of what was going on and he couldn’t do that from The Hague. He appeared really pleased to be in the thick of it over here and complimented us by saying the UK’s innovative and creative capability were needed - with 50 per cent of our exports going directly in to the Eurozone, he’s got a point.

According to Meneer Rutte, we have much in common with other non-Euro currency countries such as Sweden, Poland and the Baltic states who are all growth oriented as much as his own country – which, after all, is this region’s closest continental neighbour across the North Sea.

This 44-year old politician is just over a year in to a role which has no limit to its term in office and based on the interview, he sounds like a person with whom we’d all like to do business.


Will Mooney MRICS
Partner
Commercial, Cambridge

Learning to live with whatever ‘the new normal’ is

I’ve been told recently that ‘being on the brink is the new normal’ and this is how it is going to be for the foreseeable future. There is the temptation to head for the hills but that’s a little difficult for us in the flatlands of eastern England.

Yet in the past month, I’ve read comments by property grandees and gurus which suggest parallel ways in which we can survive and actively thrive in this new normality.

At a strategic, long term investment level, it’s difficult not to agree with those – like Jeremy Newsum of the Grosvenor Estate - who favour a quiet acknowledgement of the fact that while there is a good reason to panic and thereby to join the throng and sell wholesale, it’s probably best not to. We will only add to our own troubles.

The most sage should just sit it out day-to-day and resist the temptation to follow too closely the lead of the markets at such times.

Property, after all, is but a tiny part of something bigger which is happening.

While there’s the feeling that we neither know what that something bigger is, nor do we know how it will play out, it’s better to control what we can than add the to mayhem.

Yes, there are select deals to be done because even a modest return on property is better and safer than other many asset classes.

While the cool advice is to choose to do nothing on one level, there is a level where a more thrusting approach is required. This advice is encouraging us to adopt tactics now to embrace this ‘new normal’ and come to terms, quickly, with the opportunities emerging and on offer to us by this new world order.

This advice talks with confidence about now being a time for new skills, new sectors and, even, new sub-sectors. So while the world is ‘getting more global every day’, it seems the way forward for property advisors is to become more specialised and niche to get in tune with our more fragmented markets.

It is cheering that while property is a dry investment, it’s still considered an investment with a return, nonetheless.

Anyone advising clients with retail and leisure interests will get what is meant by the need for specialist advice in fragmenting sub-sectors.

What we can all agree on is that we’re in a time of price correction when it comes to assets. The hurt we’re taking in property is probably only what we’re due anyway post-2008, if we really stopped to think about it.

As we look around to other business sectors, let us be thankful that if price correction is the worst punishment we’ve got to take and with the addition of working a harder in new ways for our clients in order to advise them better on all things niche, then we’ve got off quite lightly.

If a state of affairs goes on for long enough then it’s normalised - so we’d best get used to it.

While it’s a good time for neophiles, it’s a bad time for haters of business jargon and I am going to add to their groans here by suggesting that, perhaps, the default state of being for the foreseeable future is one of renewal becoming the new normal.

Will Mooney MRICS
Partner
Commercial, Cambridge