Always look on the bright side of life

By Martin Skinner,

"Martin Skinner"

Martin Skinner

The last few weeks have been frantically busy and while lots of big deals are on the horizon, fundraising and transaction setbacks are still frequent and frustrating.

On the personal front I’ve just returned from a trip to New Zealand and best man duties at a close friend’s wedding.  In fact I wrote most of this on the long flight back, having written my speech at the last minute on the way over.  The big day was fabulous and was followed by a tour of the North Island together with Ben and Anna the newlyweds, their daughter Trilby (hats off to them for that name) and Ben’s family.  Some honeymoon! I was there when we heard the terrible news from the South Island and my heart goes out to everyone in Christchurch.

Ben & Anna take their vows led by Captain Barnaby

Ben & Anna's Wedding in New Zealand

While I was out there corrupt leaders were falling like dominoes as people harnessed the power of everyday web tools like Google, Facebook and Twitter.  The debate rages as to whether the situation will deteriorate without the ‘regional stability’ these leaders used to provide.  Personally I believe increased transparency and accountability will lead to better government in the long run and that must be a good thing.  Short to medium term the instability will increase the flow of capital out of regions like the Middle East and into safer environments such as prime and fringe prime London property.

In terms of the UK economy, discussion is finally turning towards growth. While the downside surely has to include rising interest rates, there is also much to be positive about.  David Smith recently published another superb piece describing how the ‘feel good factor’ was lost when consumer price inflation overtook wage inflation, an event that paradoxically contributed to higher employment and lower interest rates.  He also highlighted a report forecasting a return of the feel good factor next year, when broad inflation is expected to fall back below wage inflation once more.  At the same time, development luminary Mike Slade listed many more reasons to look on the bright side of property life in his recent Property Week article.

I’m sometimes accused of being optimistic as if that’s a bad thing.  Yes, I underestimated the credit crunch and agree it’s important not to get too carried away with wishful thinking.  At the same time, it’s also important to recognise the positive signs that are beginning to appear.  When I was playing a lot of tennis, we were always told to focus on where we wanted to hit the ball and it clearly improved results.  With timing and location critical to success in the property market too, I’m looking forward to some excellent years and returns ahead – particularly for investors in London residential.  As real estate emerges from the downturn, London’s diverse, much vaunted and ultimately proven strengths will continue to draw both investment and human capital in ever greater numbers.

Having just gone through a recent batch of reports from the big UK residential agencies, I thought the following key points and charts on London residential property were worth sharing:

“…an astounding 70% [or £2.9 trillion of the £4.1 trillion total market value of UK residential property] is held as equity”.

“…it is London’s status as a world city that sets it apart in value terms from the rest of the country.” Yolande Barnes, Savills, Residential Property Focus Q1 2011
Savills are now forecasting a rise of 33.4% in prime central London house prices over the next 5 years.  See the full report here.

How low levels of available housing stock have historically supported house prices

Available Stock vs Price Growth | Savills

“Outperforming their national markets, the cities of London, New York, Moscow and Hong Kong are sought after by the world’s richest households and are at the forefront of a truly global market ~ the residential sectors of these global cities have more in common with each other than they do their domestic markets” Yolande Barnes, Savills, Spotlight on Four Global Cities, Feb 2011  Read the full report here.

5 year performance, cities (executive unit) versus countries (national house price index)

5 Year City Performance | Savills

“Global economic growth is now running at pre-recession levels contributing to wealth creation around the world which is pouring into London again. ~ London’s reputation as a ‘safe-haven’ investment location, combined with geo-political concerns elsewhere around the world, most recently for example in Egypt and Tunisia [and now Libya], have helped draw buyers into the market”  Liam Bailey, Knight Frank, The world’s most desirable residential market: The Super-Prime London Report 2011

P.S. Check out www.beek.co This is recently married Ben Knill’s new and innovative technology venture and it’s shaping up to be a huge success!  I’m proud to say that we incorporated early versions of his interactive 3D walkthroughs on our consumer website Nice Room as early as 2003.  Prospective tenants loved it and we got a lot of remote bookings as a result.  As consumers increasingly shop online and seek comfort in online research before buying or travelling, its potential is enormous.

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Degree of certainty persuades property to get into beds with students

By James Whitmore

Students are responsible for the most recession-proof property sector.

The tallest tower in London’s financial district, rental growth of 5% a year for the last six years and a conference that this year was more than double the size of last year’s all relate to the fast-emerging student accommodation sector.

While every Tom, Dick and Harry is scrambling around trying to persuade institutions to part with their money, Unite Group, the UK’s only listed student accommodation provider, announced its UK student accommodation fund was in the final stages of raising £150m of new equity for the expansion of its portfolio. The new units will be sold at a 6.7% premium — yes, premium — to the fund’s 30 September net asset value.

The fundraising was oversubscribed and, while existing investors put £60m in the fund, £90m came from new ones.

The attraction is what all investors are clamouring for at this point in the property cycle: secure income. The fund provides a net 7% income return on its NAV, which is very compelling. Add to that the very likely prospect of rental growth — Unite has actually achieved 9% growth in the last two years but expects 3%-5%in future — and annual returns should exceed 10%.

High grades

Any thought that the fund’s income could fall should be dismissed. The occupancy level of the fund has always been in the high 90% area — it is currently 98% — and shows no sign of falling. As Blackstone director Stuart Grant, who oversees the private equity firm’s student accommodation business Nido, told Bloomberg this week: “There is a chronic imbalance between supply and demand in this sector.”

Property Week’s Student Accommodation conference, held last week in association with Unite, attracted 328 delegates. Senior figures from the likes of Blackstone, British Land, Heron and the Royal Bank of Scotland were in attendance.

Knight Frank’s student accommodation expert, James Pullan, discussed his firm’s latest Student Property Review, which shows that:

  • Rental growth remains robust, recording growth of 5% a year over the last six years, compared with 0.6% for commercial property.
  • Demand for university places continues to rise.
  • The total number of people in higher education has grown from 1.8 million in 1996/97 to almost 2.4 million in the academic year 2009/10 — an annual growth rate of more than 2.5%.
  • As an asset class, the student accommodation sector is maturing and becoming recognised as an important element of the wider property investment market.

On the eastern edge of the City of London, meanwhile, Nido Spitalfields, Blackstone’s second student hall in London, is rising fast and is expected to open in the middle of next year. The 33-storey building will have space for 1,204 students, paying as much as £300 a week for an en suite room. It will overlook Broadgate, the office complex that is half-owned by Blackstone.

Blackstone entered the student accommodation market four years ago and has so far invested more than £400m.

Its first project was a pair of 16-storey towers at King’s Cross that were completed in 2007. Most rooms at Nido King’s Cross cost £245-£270 a week, and around 80% of them are occupied by foreign students, notably from America and China.

Blackstone plans to build a third student hall next year on a site close to Notting Hill in west London. The building’s 272 rooms will be available from 2011. Outside the UK it has bought a site in Barcelona and is looking at others in Paris, Sydney and Singapore.

Within three years Blackstone will probably sell the Nido business, which could take the form of a flotation to create a REIT, joining Unite.

It would be no surprise if British Land’s new senior triumvirate of Jean-Marc Vandevivere, Steve Smith and Charles Maudsley take an interest in the sector, especially given their relationship with Blackstone with whom they jointly own Broadgate. (James Whitmore, Property Week) http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3154535

Return of the private investor

By Nick Duxbury

Frustrated with low interest rates and hungry for income, investors cramming themselves back into the country’s auction rooms have sparked a mini-boom. Retail funds, too, are showing signs of life

Andrew Derrington is an 83-year-old private investor from Hackney, east London. With his straggly white beard, faded pink backpack and crutches, little about him would appear typical of the average auction buyer. But his reasons for bidding at Cushman & Wakefield’s commercial sale last Thursday — the first he has attended in three years — could not be more typical.

“I am earning bugger-all interest on my cash in the bank, so I thought I would get some income through decent property yields,” he explains.

Having just lost out on buying a dental surgery in Norfolk, Derrington is still sitting on around £350,000 of cash which, like millions of other savers, was earning 5% interest in the bank just over a year ago. This all changed after the collapse of Lehman Brothers. Between 8 October and 8 March, interest rates were slashed to a record low of 0.5%. It is no coincidence then, that March also marked the recovery of the auctions market.

Desperate times
While the rest of the investment market was paralysed by a lack of debt finance, desperation for income — combined with a perception that the bottom of the market had been reached — pushed average yields in the auction room down. Auctions Results Analysis Service (ARAS) and Investment Property Databank (IPD) figures show they fell 17 basis points in the first quarter of this year. Since then, the private investor market has gathered momentum. Even those worst-hit investors, the retail funds, are now back in the game (see box).

A glance in the auction room reveals just how hungry investors are. Last Wednesday, Jones Lang LaSalle experienced what auctioneer Richard Auterac says was “the best demand we have seen in years” at its sale at London’s Cumberland Hotel. The auction achieved a sale rate of 82% and raised £34.8m from 32 lots. Most significantly, the average yield on the day reached 6.75%, compared with the IPD all-property average of 7.72%.

A similar 100-basis point difference was evident at Allsop’s bumper £83.2m sale — its largest in 20 months — the previous week. It scored a 92% sale rate and the average yield was 6.7%. Noble analyst Michael Burt described the sale as “first-hand evidence of returning liquidity from cash-backed buyers competing yields downwards”.

Third-quarter ARAS figures from IPD and JLL reveal that the weight of money coming through the auction room has doubled since this time last year.

“The first and second quarters experienced a big bounceback and, based on last week’s sale, I am not convinced that the foot is going to come off the pedal anytime soon,” observes Auterac. “After that we should see a stabilising of prime yields. A few months ago we were seeing a new breed of opportunistic buyers — but now it is mostly those from the last cycle with surplus cash and looking to protect their income.”

One such buyer is Richard Liddiard, a partner at Carter Jonas, who is acting on behalf of a 25-year-old family trust. Bidding at Cushman & Wakefield’s sale last week he won lot 21, Prospect House in Leicester, which is let to the University of Leicester until 2019 at £124,623 a year.

“There were some ludicrously low yields in the room today — but I was happy with what we paid,” he says.

The trust, which did not want to be named, bought the property at a 6.54% yield for £1.79m — without debt. It was an income play that will be used to rebalance the trust’s £13m portfolio — 60% of which comprises commercial property, away from equities and cash — which the trustees say have both failed to provide consistent income.

“We have some nervousness about property still,” a trustee explained after the sale. “But that concern is tempered by the need for income to rebalance the portfolio. For us, the return is income protection.”

While the private investor buyer profile might be consistent, the selling profile has changed. No longer is it distressed private property companies and retail funds. Big names that were covertly buying up until the summer are now taking advantage of what they regard as a pricing window. At Allsop’s sale, private investor Tony Khalastchi sold eight properties — most of which were in London — at prices he says he could not have fetched two years ago.

“In all my years in property I have never seen anything like this,” he says. “The last few weeks have been crazy. I can get more than my money back on the well-let, well-located London properties and banks I bought at auction at the height of the market.

“As far as buying goes, I think the risk outweighs the rewards right now — everyone is going for quality.”

Encouraged by the prices being achieved for well-let London property and the influx of overseas buyers — one family flew in from Pakistan for the Allsop sale — Khalastchi plans to sell some bank lots at the next auctions.

Property Week columnist and chairman of Structadene David Pearl was also selling four central London properties and was “astonished” with the “top of the market” prices he achieved on the day.

Far too demanding
“In all my years in property I have never seen anything like this. The last few weeks have been crazy”
Tony Khalastchi, private investor

In the private treaty market, a surge in demand has left many buyers unable or unwilling to compete, forcing them to look outside the UK to find “value”.

One such investor is Aprirose, the Mayfair-based investment manager. Since September last year it has spent more than £160m on behalf of wealthy individuals — many of whom are based in Africa.

But managing director Manish Gudka concedes it now faces a drop-off in purchases of sub-£10m lots as it struggles to compete with cash buyers.

“In 2006/07 we were being outbid on most of what we looked at. Now, it is starting to head that way again. We are looking to countries like Germany as we think they offer better value. As long as the private cash buyers are paying the current prices, we won’t be able to compete — in the auction room the private investor is paying more for the same type of property.”

As a result of the growing competition, Gudka says Aprirose will move up the risk spectrum and target larger lot sizes that require debt funding. The investment manager is also avoiding the open market and buying instead from receivers off market. For example, last week it bought a portfolio of 11 JD Wetherspoon pubs from receiver Ernst & Young. It co-invested in the pubs with three investors, paying £65m on 25-year leases at a yield of around 7.35%. Gudka notes that this is more than 100 basis points lower that the 6.12% average yield of five Enterprise Inns pubs sold at Allsop’s auction.

Deals like this will only get harder to source, especially given the resurgence of other private investor vehicles such as syndicates. Mayfair-based Hotbed’s 778-strong membership increased by 71 in the last six months — 55 of whom have signed up to property syndicates rather than private equity.

“In the last four months, private investor appetite has definitely grown,” says Ed Henson, investment director at Hotbed. “But we target the sub-£10m market and have found sourcing deals increasingly hard. There is a growing membership, but not the opportunities to meet the demand.”

One of its syndicates, which has placed a West End ground rent under offer, has been oversubscribed, thanks to the bond-like security offered by the transaction.

Bet on the syndicates
The buying power of private investor syndicates has already been proven by companies such as Tritax Securities. The fund manager bought the 97,000 sq ft headquarters of the Intercontinental Hotels Group in Broadwater Park, Denham ,from Invista Real Estate Investment Management in June, after raising £28m from private investors in less than four weeks.

Furthermore, Khalastchi, who has invested in joint ventures with LaSalle Investment Management, says institutions are also moving in on the £2m-£20m market, which until recently was dominated by private investors.

“They have learned that there is more flexibility in the smaller lots and demand from cash-rich investors if they need to sell,” he explains.

So, if the auction rooms are one of the last sanctuaries for the cash buyer, is there a danger that private investors like Derrington will be overpaying?

“For a private investor who would otherwise be earning 0.5% in the bank, these yields are still attractive and rational,” argues Auterac.

“I am unlikely to live to see half the lease lengths I am trying to buy, so the risk is not that great,” jokes Derrington. “I could probably find a more secure way to spend my pension — but not with such good returns. And I think I have reached the age where I can take a few risks now.”
Retail funds: bears come out of hibernation

Retail funds are also back on the acquisition trail. The same funds that, battered by redemptions from private investors looking to exit, were some of the biggest sellers in the market only six months ago, are not only seeing net inflows — they are now also looking to buy again.

Henderson’s New Star UK Property Trust fund expects to invest in long-let property in the next two months — as does the £1.3bn Aviva Norwich Property Trust, which expects to complete a deal before Christmas. Aviva, the largest private investor fund, had its first net inflows since June 2007 in August, and this trend has continued through September and October. Now, with an offer status and a cash weighting of 18%, it is seeking to buy lot sizes of £15m and above.

“As long as private cash buyers are paying the current prices, we won’t be able to compete”
Manish Gudka, Aprirose

But it is not just retail fund managers that are becoming more bullish. The most recent survey of sentiment among independent financial advisers (IFAs) by the Investment Property Forum (IPF) shows an increase in the number recommending a greater allocation of clients’ funds to property.

Fewer IFAs are recommending no allocation to property — down to 11% from 18% in May — and there is an increase in the number that are recommending an increase of between 1% and 15% (see graph).

Illustrative of how quickly sentiment has changed is the view of Mark Dampier, research director at Hargreaves Lansdown, who in his August Property Week column was a self-confessed bear regarding commercial property.

“I have changed my mind,” he now says. “I have moved from deeply bearish to neutral. At the very least there will be a short-term squeeze on capital values. I would say start allocating 2%-5% of portfolios.”

The latest figures from the Investment Management Association (IMA) show property funds’ net retail sales more than doubled in September from August to £261m. So after six months of successive inflows, property now makes up 10% of total net retail sales across all sectors — up from 6% in August.

But improved sentiment and the return of net inflows to funds are not enough to convince some that the man on the street has truly returned.

Philip Nell, head of retail funds at Aviva Investors, certainly thinks not. “The early investors have been funds of funds [operators of open-ended investment companies and listed trusts] and discretionary wealth managers,” he says. “The core IFA community have not returned to us yet. The man on the street fears unemployment and so is protecting his cash.”

Dampier agrees: “Property retail funds were one of the standout burns of the downturn. Investors were badly led down the garden path at the wrong time. The man on the street will return at some point — hopefully before everything gets too expensive again.” (Nick Duxbury, Property Week). http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3152154

The worst may be over but this ‘mini-boom’ is not sustainable

By Philip Nell

So it looks as though 2009 will turn out to be a year of two halves — as 2007 was — but is this incredible recovery sustainable?

My own view is that it can’t possibly be, but what will be the shape of the performance graph from here?

Many commentators believe the sheer quantum of equity available today, combined with the complete lack of investment product, will sustain the recovery in the short term, until rental growth returns to the market in two to three years’ time.

So 2011 might be a year of income return only, but it is suggested that we are now looking at the prospect of no further capital declines over a five-year forecast period from the end of this year.

That’s all positive, but let’s not forget that we’ve just fought the equivalent of a world war. The country — which was already more highly geared than it should have been in 2007 — is saddled with debt that will remain a legacy of this economic downturn for some considerable time.

Not that I think the wrong action was taken by the UK government and central bank over the last two years — I don’t think anyone will really know the answer to that for some years to come — but in reality, flooding the financial system with credit was probably the only action available to them.

Inflation — yes, you remember that? — is coming and, for a highly geared economy, that’s a good thing.

Property has elements of inflation hedge, and so is a better bet under such circumstances than fixed-income investments. That adds to the argument that corporate bonds and government gilts are now overvalued.

Unfortunately, inflation will almost certainly bring with it increased base rates and increased bond coupons, particularly if central government needs to raise more funds through bond issues into an already-saturated system.

“There is a passive rebalancing of portfolio weightings. These have changed because the value of equities has gone up”

That’s bad for property. True, the spread of property yields over gilt yields remains at an all-time high, so there is some capacity to absorb gilt yield increases. But this is not simply a function of property looking cheap — it is also about gilts looking expensive.

So, where does that leave the question of the likely shape of the recovery? My view is that we are in a very different place from six to 12 months ago. There is infinitely more stability in the financial system, equities have shown that capital markets can go up, as well as down, and the worst of tenant default is almost certainly behind us.

Institutional investment

On the pure institutional side, there is a passive rebalancing of portfolio weightings. These have changed because the value of equities has gone up — meaning fund managers need to increase the allocations to property to keep the weightings the same.

But institutions are increasing investment not just to match their equity holdings, but also because they are going from negative to neutral or even positive to property. This means they need to invest even more in property.

Having said that, a weak currency attracts overseas investors and helps to retain UK ones, and low base rates only have one way to go — remember Play Your Cards Right?

But that also means that it will take a sustained recovery in the pound before UK-domiciled investors start to look overseas. The risks are too great. The value of sterling will go up against the euro again at some point and then you will lose out if you invested in euro-denominated assets — and hedging out that risk is still very expensive because of that.

On that basis, I think the total return graph from here will look more like my six-year-old’s attempts at joined-up writing than a smooth upward incline but, as we all know, markets very rarely respond smoothly to anything. (Philip Nell, Property Week). http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3152148

Dare to think the unthinkable: an undersupply in the City of London

By Deirdre Hipwell

Leasing agents in the City of London are almost genetically programmed to see the upside in any market situation.

Even after the worst first-quarter performance in 20 years this year, when less than 300,000 sq ft of office space was taken up, there remained a determined, sometimes desperate, confidence that the Square Mile faced more of a risk of undersupply of the best office space than oversupply.

The events of recent weeks may yet prove them right.

In the eight weeks since Nomura agreed to occupy the whole of UBS and Oxford Properties’ 541,000 sq ft Watermark Place, a further 470,000 sq ft is close to or has already been placed under offer at 30 Crown Place and Drapers Gardens.

This is in addition to Bank of China agreeing to occupy — with an option to buy — Goodbody’s 117,500 sq ft One Lothbury scheme. Hammerson has achieved a healthy maximum rent of £47.50/sq ft and nearly let the whole of 60 Threadneedle, winner of City development of the year at last week’s Offices O9 conference, while Aviva Investors and Atlas Capital Group has almost fully let 20 Gracechurch Street.

And even though strong-covenant tenants AllianceBernstein and AstraZeneca may have turned their noses up at City schemes, there is still a range of big-name occupiers trawling around for space, such as Blackrock, Clyde & Co, Bloomberg, and Royal Bank of Canada.

But for tenants looking now for more than 200,000 sq ft in the City, the choices have suddenly shrunk to British Land’s Ropemaker scheme or Minerva’s Walbrook.

And those that have to move because of an upcoming lease expiry may find landlords are gaining the upper hand as rents and terms will start to harden.

Digby Flower, executive director at CB Richard Ellis, says effective rents on the best space in the City will now start to improve more quickly than “headline” rents, as the rent-free periods landlords are prepared to grant reduce. He says rent-free periods are likely to fall by as much as 12 months quite quickly as landlords seek to “get to the cashflow sooner”.

But the agents may not want to pack away their cheerful optimism until the next downturn just yet, as it is still far from plain sailing in the volatile City market.

Gerald Ronson, chief executive of Heron International, speaking at Property Week and CoreNet Global UK’s Offices 09 conference last week, warned that, although London’s rental growth prospects look keener, “we are only two years into this nightmare”.

Nomura watershed

There is also still heated debate over whether landlords are giving away too much in their haste to secure occupiers.

Nomura’s 48-month rent-free period, which with other base build contributions equated to a rent-free period of six years, generated a mixed reaction and headlines as far afield as Singapore. However, Nomura was a watershed deal of more than half a million sq ft of speculatively developed space let to a good-covenant tenant on a 20-year lease following the world’s worst financial crisis.

UBS would have been mad not to do the deal and, although those terms may not be replicated, they are not to be sneered at.

Nomura’s was the first of a clutch of deals that have entirely shifted the City market — at least for grade A space. There are still fairly high levels of supply of secondary space, of which tenants looking for less than 50,000 sq ft may have their pick.

We are not there yet but talk of recommencing development in the City may start again. The prelet market is still too expensive for tenants, because no developer will undertake a scheme unless it can secure a rent of at least of £50/sq ft and a guaranteed profit.

In addition, construction costs are still high and, although predicted to fall a further 3% in the last quarter, they are nowhere near as low as they were at the start of the last development cycle. Nor is there that much evidence of any significant return by the banks to the development finance market, so developers may have to look to other sources for forward funding. But the shift between supply and demand is moving in the right direction.

“In London, unlike the last recession there has not been overbuilding. We will see a change in the pattern of falling rents as there is not a lot of property available,” continues Ronson.

“If you look ahead into next year, when these buildings are gone, when developers are not building, and banks are not lending, there will be demand. Rents will go up.”

Nicely in time for the completion of Heron Tower in 2011. (Deirdre Hipwell, Property Week). http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3152149

Banks and propcos make perfect bedfellows

Land Securities, British Land and Grosvenor are all in the frame for the biggest new property game in town: advising and forming joint ventures with banks.

By Giles Barrie

At the same time, executives such as former Tishman Speyer UK chief Mark Kingston are being recruited to work in house at banks.

Why are these relationships being formed now, two years after the downturn began, and how will they work?

The timing gives the clearest indication yet of the mess the banks are in. Most spent six months re-organising their own teams after being caught in the post-Lehman maelstrom, and have spent another six understanding their property problems and helping troubled clients service their debt.

With those clients’ equity wiped out, it has now dawned on the banks that, while they are the UK’s biggest owners of property, the expertise on how to manage those assets resides in another place: property companies.

Strong relationships

Agents and accountants may be able to advise, but they cannot be trusted as much as a property company, with which a bank may already have a strong financial relationship in place.

Moreover, property companies are good organisers of teams: the agents, architects, contractors and lawyers that can help the banks out of their hole.

Working with banks holds an appeal for property companies because many began to specialise in the asset management needed in the overheated latter days of the boom, as they withdrew from bidding for new properties.

Property companies also need to put very little money into these arrangements, although at this point, the two parties’ wishes start to diverge.

Banks may indeed want property companies to put equity into new joint ventures to show their commitment, but property companies are more likely to ask for a “promote” payment for their asset management work.

So, on a distressed portfolio worth £100m, they might now ask for 25% of the uplift in value if it is worth £115m in three years’ time, plus a fee on the way through — an easy £7m-£8m, potentially.

There are two possible problems with this.

How will a bank know whether the property company has driven up values, or if it is simply a function of the market?

And how can a bank be sure if it is getting truly independent help on the £100m portfolio if the property company has a rival asset or development down the road?

But these are details: the property companies hold all the aces, and the quicker the banks get into bed with them the better for the sake of UK plc. (Giles Barrie, Property Week). http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3152120

Tweets ahead (or not as the case may be)

I’m a huge fan of Property Week and read it religiously every week.  Excellent journalists, great leader and all round best-of-breed publication – it ranks alongside the Sunday Times for me as one of the only two papers I read every week.

… so please consider this constructive criticism and of the broader, corporate, industry rather than the publication itself. 

For the most part it’s good that social media has been highlighted at all (I haven’t seen anything in other property press yet).  The article below demonstrates to me how far away from ‘getting’ social media the mainstream UK property industry is at present.   Disappointing when you consider just how much networking is involved in the sector.  I didn’t really drink before I got into property; that quickly changed, and how, when I fell in love with residential – my excuse is/was that it requires so much great networking.

I’ll pick out the key points that should stir further discussion:

  • Knight Frank has 440 followers; Savills 100 (and have never tweeted) and JLL 10 – only Knight Frank is even off the starting line.  Most people I know that have been using this [5 year old] service for a year or so have 5,000 or more followers.
  • The story centres around marketing – social media experts agree that the real value is in knowledge gained and introductions made.  Listening  & helping others should come before overtly marketing or selling – in social networking business generally comes by way of attraction to centres of influence & by referral.
  • Facebook (FB) is described as a purely social medium whereas many authors of business pages on FB will describe their search engine and networking success upon establishing an active one – it’s far from purely social.

Meanwhile Claer is absolutely right when she says the personal touch is as important as ever – this should be in relation to the way people & business communicate through social media however.  Don’t just give it to one person in the marketing team; the principals of the business need to really get involved and be consistent and transparent in their communication; frequently.  And look long and hard at how they need to adapt their business and routine to suit the new, online economy.

That’s not to say real-life activity is unimportant – people buy people both online and offline and if anything offline networking activity needs to be increased rather than sacrificed in favour of online.  Time online needs to be spent ‘smarter’ and time needs to be invested in learning the ropes – because it’s not just a new rule or two; it’s a an entirely new, virtual world and it’s influencing the real world at an accelerated pace; for the better I might add.

For more information I suggest readers start by buying the excellent Know me like me follow me by Penny Power – creator of the first online social network (Ecademy) more than 12 years ago.  And check out some of our free social media resources.

For those in any doubt Thomas Power has a great explanation “it takes 3 years to adapt and succeed online – a year to be known, a year to be liked and a year to be followed.  It also takes about 30 years for a new technology age to become embedded in the economy (and for the economy to become dependent on it).  Bearing in mind the internet was created in 1973 by DARPA (US defence).  Tim Berners-Lee and Robert Cailliau invented the World Wide Web in 1990.  Therefore we’ve more than 35 years of ‘internet’ and almost 20 years of ‘web’.  The clock is ticking – adapt … or die.

Major players in property should be beginning their 3 year learning process now (if not before) if they intend to survive and thrive – and the opportunities are plentiful.  As Clay Shirky said ‘The group gets better together’.

by Martin Skinner

Source article from Property Week by by Claer Barrett below.

Are social networking websites time-wasting distractions, or can they help business? Claer Barrett finds out how many property companies are plugged in

Knight Frank has 440, King Sturge has 23, DTZ boasts 165, Savills has 100 and poor old Jones Lang LaSalle only has 10.

What are we talking about? The number of followers these firms have on Twitter.

Popular opinion suggests that social networking and the workplace do not mix. Many big firms have blocked access to internet sites such as Twitter and Facebook in their offices, believing they are a time-consuming distraction for their staff.

However, there is increasing evidence that big bosses should embrace social networking as tool for driving business, building their brands and winning clients. One property company has revealed that Twitter has doubled its profitability.

Networking has always been an essential part of the property industry. We are a sociable bunch and the perpetual search for the next deal means gossip is our lifeblood.

No surprises, then, that Facebook was an instant hit with the younger property crowd. Online groups were quickly set up, but served little purpose other than to exchange office gossip, circulate drunken pictures and organise leaving dos. Their purpose was firmly social. The novelty has since worn off.

A gap in the market emerged for professional sites for older users who wanted to advertise their business acumen. The most popular of these is LinkedIn, on which members create detailed profile pages in their real names.

“Friends” become “contacts” and, once you have joined, you can nose through an individual’s network to see just how well connected they are. You can even upload your CV.

Many older professionals admit they use LinkedIn in the hope of securing a lucrative non-executive directorship, or board position in an industry group or charity that will enhance their reputation.

It is not just jobseekers and the promotion-hungry to which this site appeals. As a result of the downturn, it is an invaluable publicity tool for professionals who have set up their own businesses.

LinkedIn appeals to the mainstream, but Twitter is a different concept entirely. Known as microblogging, users can post short messages, or “tweets”, which can be about anything at all, as long as they are less than 140 characters — the SMS or text message limit. These are sent to “followers” who have opted to track that user’s online musings. Reading the site’s strapline, “Share and discover what is happening right now”, one can conclude that Twitter is the future of news delivery. Certainly, reports of the demise of the newspaper ring loud and true when browsing through Twitter’s detailed collection of news feeds.

Popular follows for property professionals include Telegraph Property, Times Property, London Evening Standard Business News, Property Week and Estates Gazette.

So how do you get a news story into 140 letters? Simple: follow the headline and hyperlink approach so that users need only click through to the website. The news finds you, and there is none of the tiresome bother of actually reading a paper.

As one might expect, the retail and residential worlds are leading the property industry’s charge into cyberspace. Follow Westfield London on Twitter, and you can receive notice of sales, new openings and the latest fashion trends.

Down in Bristol, Cabot Circus is tweeting news about promotions, competitions and online discount vouchers. Glance at the icons and you will notice that the malls are “following” individual retailers, such as H&M and Monsoon, which quickly spotted the marketing potential of social networking sites.

The residential world has a different sort of presence. The rise of online estate agency portals has already pushed the home-search industry online. But the fear of receiving thousands of irrelevant tweets about homes for sale means sites have had to rethink their consumer appeal.

A very popular follow, Property Porn, is not as dodgy as it sounds. The news alerts direct users to marvel at unspeakably expensive properties they will never be able to afford. This useless, albeit fascinating, information is collated by online estate agency Globrix, which is cleverly driving web traffic and brand loyalty to its main site in the process.

Another special case is the Landlord, who uses Twitter to post his hilarious and outrageous blogs. Having commanded a huge following within the buy-to-let community, his website carries adverts from all kinds of property services firms that are happy to pay to grab the attention of his fans.

To date, this kind of innovation has been lost on the commercial property industry. All the big agents have a presence on Twitter, but their most exciting tweets are press releases from the research team.

In fact, Savills — which has 100 followers — has yet to make a single tweet. A company spokeswoman confirms the situation is “under review”.

Whatever Savills comes up with, it is likely to be directed at clients, rather than employees of the firm. As a guess, tweets about wealth management, “super-mortgages” and the high-end residential market will appeal to a well-heeled audience.

Easy as B2C

Business-to-consumer strategies on Twitter are easier to dream up than business-to-business ones, but that is not to say they will not work. For example, take the case of Needofficespace.com.

“We started using Twitter three months ago and it has changed our business model and more than doubled our profits,” says James Welch, director of Needofficespace.com, which has 200 followers.

Welch started a Twitter news feed to bring traffic to his website, a portal for serviced office and management business space. The stories are aimed at occupiers and those working in the serviced office leasing industry, and he invested in a full-time member of staff to make the posts.

“The exposure has got us on to other people’s areas, who are following us on Twitter, and it’s grown from there,” he explains. “We get hundreds of serviced office leads a week, but now we are getting demand for traditional leases, too, which are more profitable. We never got these before at all. The only reason we’re getting them now is Twitter exposure.”

The RICS, which has nearly 1,000 followers, is surprisingly ahead of the game. It used Twitter to promote this month’s launch of Surveying-360, an online resource for graduates who are considering a career in surveying.

Property Week launched Property Network a fortnight ago and its users are already busily blogging, joining groups and sharing information, experiences and pictures (network.propertyweek.com).

And executive search agency Kerr Ingram has set up its own social networking tool, Kerr Ingram Direct.

“It’s very clubby and it’s just for property professionals,” explains founder Patricia Kerr. It is also unusual because users’ profiles are anonymous and accessible only by clients who pay Kerr Ingram a search fee. Although their level of experience is listed, clients do not know their identity and so can only use the service to blindly send job specs and request interviews. Since its launch, the database has attracted nearly 400 profiles.

There is no doubt that online social networking is a popular and fast-evolving trend. But one drawback is that the medium through which it is provided is subject to constant change. So to neglect traditional networking skills would therefore be absurd.

In fact, with the increasing background noise of technological innovation, the personal touch has gained added currency. When it comes to winning your next piece of work, a simple phone call could end up being the best route to your client’s heart — and cheque book. (Claer Barrett, Property Week) http://www.propertyweek.com/story.asp?sectioncode=274&storycode=3151797