BTR - GETTING BEHIND THE SCENES BUSINESS HUBS MEAN GROWTH CGT TAX LOOPHOLE CLOSES FIVE ERRORS TENANTS MAKE - all the news and all the views from ...
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Spring 2019 BTR – GETTING BEHIND THE SCENES BUSINESS HUBS MEAN GROWTH CGT TAX LOOPHOLE CLOSES FIVE ERRORS all the news and all the views from Allsop TENANTS MAKE THE RETAIL RESISTANCE HAS BEGUN!
all Spring
27
03 / 15 /
Retail resistance National Planning Policy
National Investment Framework (NPPF) – how
has it changed and what
impact does it have?
05 / Residential Investment
Top build to rent performance and Development
is built behind the scenes Welcome to the
Build to Rent
latest edition of
03
‘all’, Allsop’s
bi-annual
magazine
15
25 /
Midtown – With all of us bored of the
the best of all worlds
‘B’ Word it would seem that
In this issue
West End Leasing
the good old British Bulldog
spirit is seeing many of us
27 / through this unprecedented
From pet-friendly to 3D and unsettling time.
all Spring 2019 Letting and Management
The teams at Allsop, whether
commercial or residential,
28 / transactional or professional,
Allsop hosts an audience are just cracking on with life
with Robert Peston and business. Since our last
09
edition in the Autumn and
07 / 17 / against the backdrop of uncertainty, Allsop have been involved
A City icon about We need new business
in some enormous deals – with four investment transaction deals
to be reborn hubs to enable growth and
of between £120 million and £200 million.
City Investment maintain London’s appeal
Business Rates This edition explores, from the Receivership team perspective,
the challenges and trends in the landscape of lending; we answer
09 / the question: ‘is valuation an art or a science?’; auction thoughts on
#MeetTheMarket – 19 /
‘#meet the market’ and the importance of a multi-channel offering; tenant
a day at the auction What you need to know
tips when negotiating commercial leases; the little discussed new rules
28
Commercial Auctions to prepare for the new
capital gains tax for on capital gains tax for overseas investors from April 2019 and finally,
overseas investors we look at a ‘City icon’ – reborn, and I am not talking about Jon Ruback!
Commercial Valuations
13
Enjoy the read.
11 / 21 / 29 /
Safe as houses? Is the future multichannel Commercial deals
Challenges and trends in or unichannel?
the market for the changing Residential Auctions
landscape of lending 31 /
Receivership Residential deals
23 /
Five errors tenants make Scott Tyler FRICS
13 / when negotiating leases 33 /
Senior Partner
Valuation – art or science? Lease Consultancy Allsop life
Valuations
01 02
National Investment
In recent years, e-commerce has hoovered strong growth in online sales. Indeed, shop In both London and the West Midlands,
up roughly a fifth of all retail spending in retailers have an opportunity to leverage major infrastructure improvements are set
IL
the UK, directly diverting sales away from their properties into a logistical advantage, to offer big boosts to retail. In London, the
RETA
high street retailers. Online-only retailers, offering ‘click and collect’ services. In this Elizabeth line will make it easier for far-flung
like Amazon, are nimbler than their property- way, retailers can convert online sales into consumers to access retail locations,
bound competitors. Unburdened by increased footfall. Still, traditional players have increasing footfall. Moreover, transport hubs
CE
overheads, online retailers can offer heavily much work to do to convince consumers to provide opportunities for placemaking.
RESIS TAN
discounted products – cut prices have shop in-store rather than online. Thanks to the high volume of people that
now become the norm. Meanwhile, high Stagnation within the retail sector has not go through the stations, the areas around
street retailers struggle to stay afloat in the gone unnoticed by investors. Allsop’s King’s Cross and Liverpool Street stations
face of a rising minimum wage, increased market research shows that total retail have become locations in their own right,
business rates and (thanks to Brexit) import investment volumes were down 6.4% in offering consumers access to new, high-
costs. Unable to compete against the online 2018 to £9.230m compared to £9,861m quality commercial and leisure space.
giants, traditional retailers have shown poor transacted in 2017. Regionally, volumes One consequence of the Elizabeth line
profitability, with several big-name retailers fell in 9 out of 12 of the regions we looked might be the creation of new prime retail
entering administration in 2018. at, with volumes in Northern Ireland and spots across London, providing new and
Andrew Wise National Investment Wales faring particularly badly. exciting opportunities for retail investment.
However, our market research also Similarly, in the West Midlands, the
Life is increasingly tough on the high street. Faced with
Nonetheless, revealed that two regions, London and proposed arrival of HS2, which is set to
dramatically improve connectivity between
these retailers may
the West Midlands, are registering steady
myriad challenges – from rising costs to the rise of e-commerce growth. Whist the current weakness of London and Birmingham, may explain the
uncharacteristic growth in retail investment.
– retailers are being forced to review their business strategies. yet bounce back the pound may explain an influx in foreign
investment, why is interest focussed on The resulting reduced travel times will
As a result, retail investment volumes in some parts of the these areas in particular? widen access to talent pools and improve
opportunities for workers looking to
country are in decline. However, defying the doom and gloom, Nonetheless, these retailers may yet
For starters, London’s retail market
has remained strong. In 2018, at least
commute. Accordingly, HS2 has attracted
London and the West Midlands are bucking the trend. bounce back. Legacy players like Tesco,
36 international retail and leisure brands
new businesses to the region, as well
Next, Greggs and John Lewis are as new jobs and residential investment
So why are these regions immune to the investment downturn? performing better than expected with
opened their first ever UK outpost in
London. Similarly, commercial property
– bringing a twinkle to the eye of retail
recent Christmas trading statements investors. Indeed, the region recorded
prices are yet to fall significantly, suggesting
showing growth in like-for-like sales. the greatest growth in employment of all
sustained demand for retail and office
Many established brands have even UK regions in 2018, with 2.2% growth and
space in the capital.
responded to the challenge of e-commerce the creation of 52,000 jobs, the second
by investing in their online offering, with fastest employment growth behind London.
Next, Joules and Dunelm registering In fact, the West Midlands is set to be
the fastest growing region outside
of London and the south east,
with 1.7% forecast Gross
Value Added Growth
until 2021, according
to EY’s Regional
Economic Forecast.
Although investors are
increasingly selective when
considering opportunities
in the retail sphere, there
are exceptions to the rule.
Retail investment growth
in London and the
West Midlands shows
that, when presented
with the right mix
of infrastructure
improvement and
employment growth, investors are happy to
buy into retail assets. We expect transaction
volumes to pick up as investors waiting on
the side lines look to enter the market when
the right opportunity presents itself.
03 04
Build to Rent
Top build to rent BTR operations are made up
of 100 daily actions, 1,000 weekly
performance is built tasks and a million annual decisions
behind the scenes
Lesley Roberts Build to Rent
The Grenfell tragedy and Dame Judith Hackitt’s
review on building regulations and fire safety
highlight the responsibilities of landlords and
the importance of good management.
As the number of build to rent (BTR) A decade ago we saw an explosion of
developments increases, ‘good Gordon Ramsay-style TV shows and
management’ will continue to draw focus. the kitchen shenanigans of high-end
But how does good property management restaurants. This behind-the-scenes looked
add value to schemes? at what is involved in Michelin-star food
A
preparation and gave us an insight into
D
Letting and property management is,
how much effort goes into what might
D
by nature, extremely complex,
ED
demanding experience and skill from its be deemed ‘the edible art experience’.
practitioners. Every aspect of property Who would have thought that a blowtorch,
VA
management carries with it an element paintbrush and chisel could create such
of risk – which property managers are magical food? And those who value this
LU
responsible for mitigating. are willing to pay for it.
E
Protecting people and assets is the core Comparable, although not nearly as
function of the property manager and glamorous, is high-quality resident
getting it right must always be the top service for BTR developments, which
priority. However, in the competitive and also requires skill, seamless technology
service-driven BTR sector, savvy consumers and infinite planning behind the scenes.
have high expectations and demand far more The customer experiences the end result what they do. To care about what you do and
than the minimum management standard. exactly as they should, without knowing how you do it allows you to stand out from
(or needing to know) what happens to the crowd, especially in what could soon
deliver such excellence. And residents become a homogeneous rental product.
who value this, will also pay for it.
Creating a fit-for-purpose culture of
The best property managers use their ownership and inclusion is imperative.
resident service expertise, enhanced by Skills and technical knowledge can be learned
technology, to help maximise occupancy and gained, as can experience, but personal
and minimise voids, ensuring that income values are ingrained and a key ingredient of
streams meet investor expectation. how people perform on a day-to-day basis.
However, arguably more important than any BTR operations are made up of 100 daily
of these factors is the creation of the right actions, 1,000 weekly tasks and a million
culture. In order to create the appropriate annual decisions and every single one has
culture, we have to understand the individual the capacity to make a difference to the
property managers, not just their function performance and experience of a property
but why they do what they do. and its people. It is this that makes the
In my opinion, long-term BTR success is built difference and is where property
on people and their emotional ownership of management truly adds value.
05 06
City Investment
a city icon about
to be reborn
Jonathan Ruback City Investment
The iconic Ibex House stands in a prominent position, occupying an
island site of 0.75 acres, just a short walk from Aldgate. This impressive
1930s office building was designed by architects Fuller, Hall and
Foulsham in the Streamline Moderne style of Modernist architecture,
popularised across the UK by Odeon Cinemas. Today, Ibex House finds
itself at the crossroads of London’s creative, financial and tech districts.
The Streamline Moderne, or Art Moderne Today, in addition to the 191,144 sq ft of Located in London’s Tech Belt, to the
style encompasses both the elegance office space, this spectacular building east of the core of the City of London,
and industrial elements of the 1930s. houses a restaurant and retail space as well Ibex House is well placed for occupiers
This architectural style is expressed through as a gym incorporating an underground from within the financial, tech and creative
curving forms, long horizontal lines, and swimming pool. Ibex House is let to a sectors, which are among the top
sometimes, nautical elements. At Ibex diverse mix of 28 tenants, including Capita contributors to the UK economy.
House, this is represented through black Business Services, BBC Media Action, Tenants operating in the rapidly expanding
metal-framed windows forming continuous Breast Cancer Now, Lark (Group) Ltd, Telecoms, Media and Telecommunications
horizontal bands of glazing, and a dramatic Virgin Active Health Clubs Ltd, and (TMT) sector, would also benefit from the
curved window beneath a projecting PLP Architecture, where its London building’s advantageous location.
canopy roof. headquarters are based. Furthermore, significant development is
The Streamline Moderne style can be planned for the area around Ibex House.
seen as a rejection of Art Deco: sharp The Minories Estate will be repositioned
angles were replaced with aerodynamic to provide a 342-bed Hilton Canopy, in
curves, whilst exotic woods and stone were addition to 147,000 sq ft of new offices,
substituted with sleek concrete and glass. restaurants and retail space.
It was also the first architectural style to To the south, Lloyds Chambers will be
incorporate electric light into building structure, transformed into a tech-based centre,
resulting in an ultra-modern appearance whilst Royal Mint Court has recently been
that encapsulated the spirit of the time. purchased by the Government of the
People’s Republic of China who will develop
a 600,000 sq ft new embassy, educational
Awarded Grade II This 1937 newspaper advert launched
the new development with a quoting
and cultural hub. All this redevelopment
brings with it new bars, restaurants and
listed status less rent of just six shillings per sq ft! cafés, adding richness to an already
culturally vibrant quarter.
than fifty years Allsop City Investment Team has
recently advised on the sale of this City
Ibex House is a paragon of Art Moderne
after it was built icon for a figure in excess of £121m to joint
venture partners Henderson Park Capital
architecture, standing as a reminder of
London’s past. But it is also very much
a part of today’s business economy,
Partners and Dukelease Properties.
housing well-known names from across the
Following the purchase, the new owners
At the time of construction in 1937, business spectra. Perhaps most importantly,
are planning on breathing new life into
Ibex House had the longest bands of glass it is located in the centre of an area of
this architectural landmark, with a
in the UK, which, perhaps, contributed redevelopment, and with the new owners
comprehensive refurbishment to take
to it being awarded Grade II listed status planning an exciting revamp, Ibex House
the building to its next phase.
less than fifty years after it was built. has secured its place in London’s future.
07 08
Commercial Auctions
and some stood. They all interacted and investment in a prime location guided at over As I asked my final questions of our
talked to either fellow bidders, perhaps to £12m, the largest guide price ever to be in buyers survey, I reached into my pocket
#MeetTheMarket –
run their investment appraisal past a second an Allsop commercial auction. Given the and I noticed I was low on business cards.
mind one last time before it was tested, or to attention it attracted, it was to be expected One card I know went to Jason. Jason
ask one of us a question and nullify that last that the room would be busy when this lot was in the room to track a property in
crumb of doubt before it was offered. At one was being offered, and it was. When it was Walthamstow. He was so impressed by
a day at the auction
stage, and I counted this myself, there were offered a little after 2:30pm there was the demand in the room for this lot he came
350 people in the auction room and another genuine excitement by all. And when the to find me. He told me he had a similar
100 in the upper room either having coffee, hammer fell on Covent Garden at £12.4m, investment close by that he’d like me to
chatting or reading legal papers. Or in the the room spontaneously burst into applause. consider for our next commercial auction
case of the Deputy Editor of the EG, they Despite the atmosphere, not everything sells but wanted to see the market response
were just there to watch. These sorts of under the hammer. In the last 12 months for Walthamstow first-hand and meet me
numbers create noise and an unrivalled before entrusting me with his own asset.
Ben Hodge Commercial Auctions As I made my way through from our reception atmosphere which results in sales
we have sold 143 properties after auctions,
on the auction contract, raising £87.6m for When I stood back and reflected, from the
to the rostrum at our recent commercial momentum, all to the benefit of our clients. our clients. In many of these instances the start to the finish of the day, the auction
auction I was welcomed with the usual hand Before the auction, significant interest had
been generated in the press about a lot in
buyer of these properties originated in the
room. Once the hammer fails to fall on a lot,
room played host to a full array of people.
Buyers, sellers, stakeholders, under bidders
shakes, back pats and “Good to see you”s. Covent Garden, an office and residential interested parties who are in the room will and even nosey parkers all gathered
invariably approach the client contact for to observe, partake and share ideas.
that property and express their interest, These people all chose to come to the room.
I could see that Martin and Samuel were
catching up over a coffee whilst Muhammad
room reflected our mailing list and the lots
on offer, with many travelling from far and
And when the often beginning negotiations to secure
the property, away from the public eye.
On the day there were also 89 bidders
choosing to bid by phone, online or proxy
and Ryan were, rather intensely, discussing
management issues ahead of the sale.
wide to experience the auction first-hand.
By the end of the day we had learnt that
hammer fell, the For buyers, it’s their chance to open raw who did not attend and 12 were successful
negotiations with the agent. For sellers, in their purchase. The people that did come,
There was activity wherever I looked; buyers
meeting buyers, buyers meeting sellers and
22% of our buyers were internationally based.
Each person had their own reason for being
room spontaneously it’s their chance to take advantage of the met the market.
burst into applause
auction momentum and secure a sale right
intrigued parties keen to find out who is there and it created a vibrant atmosphere. there and then. It’s a valuable opportunity
buying what, as well as a team from a large As the morning progressed to sell before the sale is over.
global surveying firm maximising the value of people moved in and out of
their research by tracking the sales and the the auction room. Some sat
market throughout the day. Buyers in the
09 10
Receivership
Safe as houses?
provide valuations. In a stagnant or falling As Receivers, we use market intelligence
It is a difficult and
market, characterised by fewer transactions, and experience to advise our clients.
comparative evidence is hard to find, and Our advice is simple: know your borrower
Challenges and
uncertain market… a valuer can only rely on historic evidence
that may no longer be relevant, as well as
and the asset. It is a difficult and uncertain
market, lacking in liquidity. As a lender
as a lender you market sentiment and agents’ opinions.
This happened three years ago, since then,
you cannot sit back and rely on
comfortable loan-to value ratios (LTVs) or
cannot sit back and
trends in the market
a decline in values close to 25% has been historic valuation reports. If the borrower
evidenced in some parts of London. This is is not returning your calls, be proactive,
rely on comfortable only one example of the trends that we have otherwise your money may not be quite
as safe as you thought!
loan-to-value
seen and that we are continuing to see.
for the changing
Other red flags in the market include part built
ratios (LTVs) development schemes, shopping centres
and strategic land; all asset types that
appear to be facing significant challenges.
landscape of lending
Annika Kisby and Victoria Liddell Receivership
At the peak of the last financial downturn, in
2009-2010, high street banks were under pressure
to reduce their exposure to bad debt and Allsop’s
Receivership team was kept busy as a result.
Fast forward a decade and times have This is exemplified by the now was not only in the number of transactions
changed. Increased government regulation well-publicised reduction in values for but also in the values achieved.
surrounding lending and high street banks prime central London residential property. Although the Receivers had identified the
becoming more risk averse means the Allsop’s Receivers noticed this trend more trend, the lack of actual evidence meant that
Receivers are still busy but not so much than three years ago when, having advised the market fall was not widely acknowledged,
with the traditional lenders and more with on several properties in prestigious London taking time to filter through. Local agents
the new players in the market: challenger locations and spoken to agents active in were reluctant when we challenged their
banks, peer-to-peer lenders, property the market, it became apparent that the pricing and it became evident that no agent
companies, private-wealth banks, market had thinned. Moreover, vendors wanted to be the first to corroborate such
mezzanine and bridging lenders. were not achieving the asking prices they a drop. For example, a well-known estate
Today’s lending landscape is far more anticipated or, more importantly, required. agent (who will remain nameless!) once
diverse than it ever has been and, as The weakening of this market remained refused to put a prime asset on the market
Receivers, we are in constant dialogue concealed with properties sitting unsold, at a certain price for fear of reducing the
and exposed to many more lenders than or being withdrawn due to lack of interest. average price for similar properties in that
ever before. The varying size and number As Receivers transacting in the market, locale. In essence, the agents were dictating
means it is easier for Receivers to spot and with careful analysis and opinions the market by maintaining artificial levels
trends and identify the areas in the market from active agents, we could see this market that were not being achieved. This also
and assets most likely to struggle in the was suffering and values had declined by made it difficult for valuers, who typically rely
short and medium term. a substantial amount. Moreover, the decline on comparable transactions in order to
11 12
Valuations
Valuation –
art or science?
Andrew Wells Residential Valuations
In our new Leeds office
we have invested in
something called
a dictation pod.
It’s a glass box for single occupancy, not To some extent, I could see his point.
unlike the sound-proofed room contestants Some property valuations are
were sent to on the TV game show Mr. & Mrs. indeed quite straightforward and the
(you have to be of a certain age to remember client’s expectations of accuracy are
that). It is in there that our valuers can well founded. Certainly, if something
concentrate when they dictate a report. very similar and close by has sold recently
That our valuers need a bit of peace and then the valuer need have little recourse
quiet to write their final report is because we to science. However, predicting what the
have desks next to our agents who can be market will pay for a retail parade let to
pretty noisy. In London and Leeds, we have multiple covenants with a student hall of
long recognised the professional benefit of residence above it, needs quite a bit of
hearing how sales are progressing, who is science in the mix.
in the market and how busy the phones are. One of my favourite musicals is Mel Brooks’
When we can see that a closing date for The Producers. There is a scene in an office
sealed bids generates 12 offers or where there are identically spaced rows of
and
conversely that investment asking prices maybe 20 desks, each with a calculating
access
are not being met, it becomes our own machine (I think it is an insurance office).
to the people
in-house thermometer of the market. The staging is meant to highlight the
selling and buying.
The mood of our auction colleagues, boredom of such a regimented existence.
Good valuers
pre and post sale is also pretty tell-tale. The ensemble breaks out into song and
have an instinct
The access that we valuers have to the dance and it is an impressive scene. It
for spotting A few
up-to-the-minute auction and private treaty reminds me how valuation departments
movement in the months
sales data is therefore invaluable and what used to look in the old days, and may still
market and are ago I had
takes valuations away from the text book. do so in some firms. It is a little strong to
entrenched in the a doorstep
Which brings me to that perennial question, call them valuation factories perhaps,
‘now’ of things. discussion
is valuation an art or a science? but you get my gist. In my view the best
That is where with my
valuers work alongside their agency
our agency and neighbour who
teams and can reflect what is happening
In my view,
auction colleagues is an expert in 18th
in the market through the potent mix of
come in. century European
both art and science.
it is both The science bit is
what you will find
furniture at one of the
international fine art Our glass box is a great innovation but
auctioneers. He was telling it does not pay to spend too long in
in the formula for
me how difficult it is to place there in case you detach yourself from
the Present Value
In my view, it is both. The arty bit is in a value on items going to auction what is happening out in the market.
of £1 in say 8.5 years’
making real-time judgements on the market, and then employ their market nous to scientific approach and devoid of given the fickle nature of the fine art Although one small advantage is that you
time at a yield of 6.25%. Or in a 35 year
on demand and supply and what type of refine the answer to give best fit to what a market perspective (in other words market and the unique appeal of each piece. can sing in the box and no one will hear.
discounted cash flow that delivers an
purchasers would be in the buying mix. hypothetical buyer would pay for the property. without the art) is unlikely to be accurate. I think his implication was that I had it easy
un-geared IRR of 8.2%. These and other
To accomplish that bit correctly, the valuer There may be a hypothetical buyer, being a residential property valuer, but he
methods are employed by valuers to get My point is that a property valuation
must of course have an ear for the market but they are in a real market. was not so rude as to say that so directly.
a valuation first into the right ‘ball-park’ derived solely from a theoretical or
13 14
Residential Investment and Development
National Planning Policy
A standard methodology is imposed, plus a ‘premium’ for the landowner (EUV+). Some initiatives are proving more successful
and assessments must now be made The use of comparable market evidence is than others. Standardised inputs, in some
publicly available. This seeks to reduce encouraged, so long as it is clear that such areas, have allowed assessments to
the use of complex, bespoke and evidence is based on developments that become clear and transparent. However, the
Framework (NPPF) – how
confidential assessments alongside are compliant with development plan ‘premium’ has created a grey area, resulting
individual applications, which previously policies, including for affordable housing, in drawn out negotiations. Developers are
negotiated down contributions, increasing and the market evidence does not use beginning to find it more difficult to justify
landowner returns and house-builder historic benchmark land values of non-policy divergence from planning contributions and
has it changed and what
profits – a subjective point. compliant developments. they need to take full account of expected
The ‘premium’ should be defined in contributions when acquiring land.
a particular way. It should reflect the The impact of the assessments being public
The standardised minimum return at which it is considered limits the quantum of information available
impact does it have?
a reasonable landowner would be willing and, therefore, standard assumptions based
approach is to sell at and must provide a reasonable on market evidence have increased, which
incentive for a landowner to bring forward can work favourably for a developer, or
significant land for development, while allowing significantly impact deliverability.
a sufficient contribution to comply with Given the inconsistent progress under
policy requirements. This approach relies the original NPPF, the new framework
Brad Harris Residential Investment and Development The standardised approach is significant. on a transparent market, whereas in reality, and guidance reforms are much needed,
Plan-makers may now use site typologies site-specific detail is difficult to obtain. although they do seem to increase the
to determine viability for sites with shared
By now, we have just about got to grips with the revised characteristics, such as location, size, land
Unsurprisingly, significant debate as to
what a ‘premium’ constitutes has already
burden on our counterparts in local
authorities at a time when they are already
National Planning Policy Framework (NPPF). So, what has changed, use type, etc. A gross development return begun, particularly given the wide-ranging struggling to keep up with existing demand.
and how has the new framework impacted viability assessments?
of 15% to 20% should be assumed – circumstances for landowners to release Local planning authorities need to ensure
a range that opens up debate on its own. their land for development. they have undertaken the necessary
By using average values and cost consultation with developers, site promoters
assumptions, planning applications and other stakeholders at the outset.
What is the NPPF? Significant focus has been made on building The revisions So, what has changed?
will subsequently be measured against It is still too early to tell if the revised NPPF
To meet its manifesto ambition of building the ‘right’ number of homes and placing The NPPF incorporates changes in how Historically, methods employed to calculate
the viability assessment that informed has delivered more housing, in particular,
300,000 homes annually by the mid-2020s, responsibility and accountability on local contributions are assessed, with the contributions have varied significantly across
the plan. Costs should be assessed at affordable housing. Still, there has certainly
the government is committed to increasing planning authorities to deliver more housing. intention of improving the deliverability of the country, resulting in considerable time
the plan-making stage and be based on been more clarity around the process,
the supply of housing through a plan-led Whilst in theory this is likely to speed up affordable homes, thus increasing supply. evidence reflecting local market conditions and cost burdens for local planning
despite a number of grey areas remaining.
system. The revised NPPF and its the decision-making process, through the Planning decision-makers now have the – somewhat more difficult in practice. authorities. They have fundamental flaws
Time will tell whether these changes will,
accompanying documents, namely the reduction of ad-hoc viability assessments, power to decide how much weight to give that impede housing deliverability and
A benchmark land value should be onbalance, quicken or stall the process –
Planning Practice Guidance (PPG), aims to the knock-on affect for Local Plans could an assessment, which, in theory, should attempts at mitigating these are welcome.
calculated based on the existing use value, the initial signs are positive.
support this by strengthening plan-making be significant. allow local authorities to resist developments
and housing delivery. that offer limited affordable housing.
15 16
Business Rates
4,700,000 sq ft
We need new £6bn
business hubs to enable
growth and maintain
London’s appeal
Victoria Boateng Business Rates CR
OS
SR
AIL
London is in need of new quality housing and the
government continues to urge developers to build
new homes and repurpose existing properties
into residential space. But with every spare inch
being snapped up for housing, the supply of new
office space is under increasing pressure.
0m
00
In central London, this struggle is London, taking advantage of the area’s The creation of an international business
2,
conspicuous. As the district is squeezed for advantageous location and scale. Allsop district requires a significant amount of
residential space, the supply of office space has been appointed as consultants to vacant space and developed infrastructure,
shrinks, making it difficult for companies ABP to consult a range of stakeholders both of which are in abundance at Royal
to gain and retain a foothold in London. on business rates at various stages of the Albert Dock. Its existing transport links will
Moreover, following the 2017 revaluation of allow future tenants to get to the City of
business rates, many firms in established London in under 20 minutes, and London
business districts, like Canary Wharf and The creation of City Airport can be reached within five
central London, have faced higher business minutes by road. Furthermore, with the
rates, forcing them to consider alternative attractive new hubs Elizabeth line’s arrival at Custom House,
for business activity
destinations. The result is that businesses are Liverpool Street station will be less than
increasingly being forced out of the City to 15 minutes away and getting to Heathrow The finished development will comprise This project is a welcome response to The findings of the London Office Policy
is of paramount
make way for new homes or simply because will take as little as 46 minutes. 4.7 million sq ft of mixed use space, the changes in the workspace market. Review 2017 support the observation that
the costs of business have grown too high. including office, retail, residential and public Not only is there pressure on available occupier mobility has been increasing,
The availability of reliable local and
This is alarming. If London is to retain its importance international infrastructure is crucial in
realm, set along a 2 km-long waterfront.
Royal Albert Dock is designed to appeal
commercial space caused by the housing
shortage in west and central London,
particularly from west to east London, which
can often offer businesses high-quality
allure to investors, executives and young determining the attractiveness of the new
to both local and international businesses, but the office rental values in those areas spaces, good connectivity, more attractive
talent as a world-class business centre, the hub, particularly as many of Royal Albert
project, providing advice on business rates at different stages of growth, thanks to its do not encourage new development. rental terms and lower business rates.
creation of attractive new hubs for business Dock’s occupiers are expected to be
at the construction stage, during vacant attractive pricing, with rental and operating As a result, low-value employment Royal Docks can be part of the solution
activity is of paramount importance. frequent travellers, working between time
periods as well as advising purchasers and costs 70% lower than in the West End, space, ideal for growing start-ups, to the overcrowded office space market
In 2013, Chinese property development zones. ABP expects the centre to become
occupiers later in the development lifecycle. allowing companies to focus on growth and often gets repurposed, pushing occupiers of west and central London, creating
company ABP announced the launch of an a magnet for local talent, a large proportion
The new business park could be one of investment. According to estimates, the new to look for alternatives elsewhere, which opportunities not only for those in need
ambitious £1.7bn redevelopment project in of which resides in East London, making
the solutions to the pressures faced by business district will help create 30,000 jobs, encourages firms to move eastward. of offices, but also retailers, and those
Royal Albert Dock. The firm seeks to create Royal Albert Dock a location of choice.
businesses in need of space. bringing £6bn to the local economy. looking for a new home.
a new international business district in East
17 18Commercial Valuations
What you need to know
to prepare for the new
capital gains tax for
overseas investors
Andrew Hoban Commercial Valuations
What has changed and why Are there any exemptions?
Capital gains tax was should I be concerned? Yes. Investment vehicles, including
introduced in the UK in 1965. A new rule will come into force: from
1 April 2019, non-UK companies disposing
sovereign wealth funds, REITs and pension
funds will be exempt from the tax on their
But, for 50 years, non-residents of a UK-based real estate asset will be taxed disposals. However, if an oversees company
were exempt from having to on the profit they make from the transaction.
The same rule will be applied to individuals
disposes of shares held in a property-rich
vehicle, which derives 75% or more of its
pay a levy on any gains made from 6 April 2019. It is important to note, value from real estate, any gains made will
as a result of upward movements however, that the tax will only be applied
on the gain, not the total amount received
be subject to tax.
in property prices, which made when an asset is sold.
These new arrangements are accompanied
by new anti-avoidance rules, introduced in
the UK a particularly attractive This change in legislation has important 2017, which seek to prevent those who fall
destination for property implications for overseas investors in both
real estate and investment vehicles, whose
within the scope of the new regulation from
restructuring their portfolios.
investors from all over the world. portfolio is predominantly (75% and above)
The UK has been a magnet for comprised of bricks and mortar assets.
Is there anything I can do to prepare?
property investors due to the What tax rates will be applied
There is. Overseas investors in UK
commercial property will need to value
size and transparency of its to the profit made from the sale their assets as of 1 April or 6 April
real estate sector, and its ability of my property? (depending on whether the investor is a
Tax rates will vary. Foreign companies company or an individual) as any increase
to offer investors favourable will be charged at the corporation tax in value before that date will not be subject
tax treatment further added rate of 19%, which will be reduced to to tax under the new rules. The Allsop
to its appeal.
15% by April 2020. It is worth noting, valuation team can help with undertaking
however, that the UK will continue to a ‘Red Book’ compliant valuation, issuing
All this changed in 2015, with
compare favourably to other countries, a formal valuation document and assist
where the rates are much higher, with with future negotiations with HMRC.
the introduction of a capital the US imposing a 38.9% tax on foreign Property owners may have implemented
gains tax on residential property. corporations, France 34.4% and
Germany 30.2%.
asset management initiatives prior to
April 2019. This may have included agreeing
Nevertheless, these Individuals will be taxed at the rate pre-lease agreements, settling rent reviews
new rules meant that of 20% for commercial property and or lease renewals and undertaking capital
28% for residential property. expenditure. This would have minimised
a large proportion of real the amount of capital gains tax paid post-
estate, notably commercial April 2019.
property, remained unaffected. The Allsop valuation team is well placed to
assist investors and provide expert advice
This loophole is now closed. on valuations for tax and accounting, helping
clients successfully navigate new regimes
regardless of complexity.
19 20Residential Auctions
The multichannel auction delivers
Is the future
four options: in-room, online,
proxy and telephone bidding
multichannel or
unichannel?
Gary Murphy Residential Auctions
Will deals that were exceptionally powerful way to sell, but it is
not necessarily the best option in every
off-plan online auction was conceived at
a time when there was truly global interest
once done in an auction case. It has to be right for the asset, and in new-build UK residential, particularly
room migrate to the also right for the client. The benefits that any
auctioneer will promote include the certainty
London. With up to 80% of some schemes
in the capital selling overseas, it was clear
virtual sale room? of a binding contract on the fall of the that inviting investors to an auction room
hammer, wide exposure, transparency, in London was inappropriate.
There has been a great deal of talk over speed and the ability to demonstrate best
the past year of online property sales. price publicly. That said, if auction is
But will the online-only auction method be Shared investment
considered suitable, now it seems we
sufficiently convincing to deliver organic need to consider which method of auction. Also, it is no secret that hiring the
growth in this sector? Will deals that were ballroom of Claridge’s is not cheap.
Auction seriously delivers when competitive
once done in an auction room, or indeed But spread over 200 lots, the clients’ shared
tension is at its strongest. The primary driver
by private treaty or tender, migrate to the investment in the multichannel process will
of competition is price. Access to bidding has
virtual sale room? The ultimate decision will show strong returns. Potentially, online-only
to be easy and open to all. The multichannel
be made by the sellers. And despite the will be attractive to a single vendor selling
auction delivers four options: in-room,
hype, any transition will be influenced by relatively low-value lots in high volume. In
online, proxy and telephone bidding.
one thing – results. these circumstances, the economies of
Online is strictly single-channel. Is that scale are obvious. Our online sale of
Do not get me wrong, I am a big supporter
a risk? It is notable that, despite having secondary and tertiary commercial
of online bidding. It is the future. Back in
offered an online bidding service for nearly investments for a single shopping REIT
1999, Allsop was the first property auction
20 years, in our experience this is the least provided a lower-cost option to the client.
house to offer an online bidding channel
popular method of the four (there were
during live in-room sales. In 2013, Allsop Until the results are in, there is little
44 online bids registered at our last sale).
(as part of a joint venture) introduced online evidence upon which to base advice to
only property auctions to the Irish market. Most buyers like to come to the sale and sell online only. There will be transition,
In 2015, it held the first UK online auction of experience the live event. That certainly no doubt, but it will not be overnight.
new homes off-plan. And earlier this year, works for me, as I prefer to make eye contact It will be a question of balance. We shall
Allsop held its first online only commercial with bidders to squeeze the final bids. see the use of the online channel during
property sale. So today, sellers and their Multichannel improves competition further. a room sale grow in popularity. Our fine
professional advisers have another method At our last commercial sale, for example, art friends experienced this long before
of disposal to consider. a buyer online in Asia fought off an investor we did in property, but they are still firmly
bidding in the room. And at our most recent working their magic on the rostrum.
residential sale, a proxy bidder based in At the end of the day, it is all about
Selecting a method
Russia narrowly lost out to a buyer in the hall. best price. Whichever method openly
As an auctioneer in a professional practice
So when should online be preferred? and unequivocally proves that, then that
that offers all methods of sale, I have always
Some scenarios strike me as immediately is the way to go.
been mindful of the importance of giving the
eligible. For example, our new homes
right advice to our clients. Auction is an
21 22Lease Consultancy
Five errors tenants
make when Non-compliance
with the lease
negotiating leases
clauses can render
a break ineffective
John Banbury Lease Consultancy
4. Agreeing to conditional break clauses ignoring the effect of any rent free period.
A break clause gives either the landlord The landlord won the case. But, five years
or tenant the right to end a lease early. later at the next rent review, the case went
before a surveyor acting as an arbitrator.
The conditions of a break clause are strictly
This surveyor agreed that the words
interpreted by the courts and can easily
purported to a headline rent, but also saw
be misconstrued by tenants: innocuous
the valuation impact: that any tenant taking
phrases like ‘comply with the covenants
on a lease with such an onerous rent-review
of the lease’ may allow a break to
clause would want a discount. The discount
be frustrated by something
was decided to be equivalent to the benefit
as small as a broken
that the lawyers secured in the first court
window blind.
case – nullifying their victory.
But, the terms of the
review clause are subject
to negotiation when the lease is
being drafted, and it is in the tenant’s
best interest to request the longest
term possible.
Non-compliance
3. Getting caught out by with the break conditions
post-break rent free periods can render a break ineffective,
Landlords often offer a rent-free period so a tenant may be liable for another
Tenants often make mistakes 1. Tenants are unwilling to pay The Act still has important applications
to keep the headline rent high, which is five years of the lease, having already
when negotiating leases. Leases are extra to secure a lease inside the today. For example, pre-Brexit stockpiling
used to boost the value of their investment moved out. To avoid misinterpretation The
complex legal documents requiring Landlord and Tenant Act 1954 and online retailing has led to a shortage
– a good bargain to entice new tenants. of the break clause, tenants should moral of
specialist attention but, often, Between 1939 and 1945, thousands of of warehouse space. A company renting
refer to a lease-consultancy surveyor this story is, when
proper thought is not given to the bombs were dropped on London and other industrial space is in a precarious position However, it is important for tenants to be
when the lease is drafted. drafting leases, request
consequences of lease clauses UK cities. More than 70,000 buildings in if its lease falls outside the Landlord and clear on how the rent-free period is treated
until later down the line when their Tenant Act 1954. Should its landlord opt during a rent review. For example, a ten-year input from both a lawyer and
the capital were destroyed and a further
effect kicks in. not to renew its lease, the company is lease often has a break clause in year five, 5. Not having both a lawyer lease consultancy expert. Each have
1.7m damaged, making them unsuitable
faced with finding new space – of which but with, say, a six months rent free period and a surveyor review a lease different expertise, so the lease is
A lack of forethought can leave for immediate occupation. The resulting
there is worryingly little available. if they do not use it. At the same time looked at from all angles and any
tenants in complicated disputes property shortage gave landlords the Tenants will benefit significantly from
there is often a rent review at year five issues are ironed out.
over lease renewal – disputes that advantage. Many threatened not to renew using both a lawyer and a surveyor to
could have been avoided. leases for long-standing tenants unless and if the review clause is not properly review a draft lease. A lawyer looks at the
2. Accepting a short hypothetical
they paid a premium. Tenants were faced worded, tenants can end up with a skewed legal interpretation of a lease clause while
So, what are the most common term in the rent review
with having to pay up or navigate the cost rent-review valuation that negates the a surveyor looks at the valuation impact
oversights made by tenants when Many tenants heedlessly agree to a short
and uncertainty of moving. rent-free period by forcing the rent higher. of that clause.
negotiating a lease? hypothetical term even when they have
The Landlord and Tenant Act 1954 protects agreed a long lease. Rent review clauses For example, during the famous headline-
tenants from eviction at the end of the term are rarely negotiated thoughtfully and rent court case, Broadgate Square vs.
of their lease: the act requires that landlords landlords will often slip in a short hypothetical Lehman Brothers, the landlord’s lawyers
give one of seven legitimate reasons for not term, which is typically valued more highly argued that the wording of the lease allowed
renewing the lease, such as redevelopment. than a longer one. them to review the rent to the headline rent,
23 24West End Leasing
TOTTENHAM COURT ROAD A400
FARRINGDON ROAD A201
Midtown –
the best of all worlds
Richard Townsend West End Leasing
It has been mooted for several years now
but, at last, the bustling area of London
that stretches from Tottenham Court Road
in the west, to Farringdon Road in the east,
has assumed its legitimate place among
London’s most sought-after locations.
The Midtown brand, until now monopolised Recently, some of the world’s best-known
by Midtown Manhattan, has gained
worldwide recognition. Just like its American
businesses have chosen Midtown as their
London headquarters. McKinsey has There are plenty of exciting things
cousin, London’s Midtown epitomises
our busy capital city, bursting with energy
announced it will be moving from its central
London offices on Jermyn Street to the
happening at the very heart of London
and life. The area blends tradition with spectacular Post Building, bounded by
innovation, industry with art, work with play. New Oxford Street and Museum Street.
This building, due for completion in the first The Ray on Farringdon Road from its the area. Allsop’s central London leasing
When the Elizabeth line finally gets moving,
quarter of 2019, stood empty for more than former home on New Oxford Street. team has been instructed on more than
Midtown will be bookended by two of the
20 years prior to redevelopment. It is hardly surprising that most of the recent 100,000 sq ft of developments in the area,
busiest stations on the new east-west route:
redevelopment and subsequent leasing which offer forward thinking businesses
Tottenham Court Road and Farringdon. The adjoining site at 1 New Oxford Street,
successes are located close to the new exceptional space at competitive rental
In addition to this exciting transport which demonstrates how to refurbish an
Elizabeth line hubs at either end of Midtown. levels. The secret of Midtown’s success is
game-change, a new breed of hoteliers, Art Deco gem without losing its charm, has
However, there are plenty of exciting things simple: amazing infrastructure and excellent
restaurateurs and retailers have come to been largely occupied by Swedish fashion
happening at the very heart of London proximity to both the West End and core
the area to cater to the ever-increasing powerhouse, Cos. Other notable tenants
– in and around High Holborn – which is financial districts allows this area to offer
demands of the high-end office and of the district include media heavyweight,
capitalising on the continuing success of tenants the best of both worlds.
residential occupier population. LinkedIn, which chose to relocate to
25 26Letting and Management Robert Peston Event
From pet-friendly to 3D Allsop hosts an audience
Lesley Roberts and Richard Leek Letting and Management
The residential property letting and management sector
with Robert Peston
has changed significantly since ALM formed in 1999.
Later this year, Allsop Letting and instant service is expected, and ALM has luxury apartments, new, build to rent blocks
Management (ALM) turns 20. Although moved to a world where residential occupiers or traditional rental sector portfolios, residents
not quite old enough to crack open the have apps and web-based technology as are rightly demanding quicker responses and
champagne, over the years the company an integral part of their living experience. heightened efficiency from their property
has seen the letting and property In response to a changing market, ALM managers.
management sector change significantly invested heavily in the development of its Technology has also facilitated a forward
to reflect innovations in technology and own software product, Virtual Agency (VA), leap in the monitoring and management
our changing lifestyles. to streamline the customer journey online of a building’s heating, ventilation and air
ALM was formed in 1999 as a dedicated via 3D virtual tours, booking viewings, conditioning (HVAC) and other services
asset management service for the residential reserving an apartment, referencing, such as fire safety systems, lighting and lifts.
property sector. Today its clients range from signing contracts and paying online. The Internet of Things allows real-time
PLCs, institutional funds and REITs to This secure, GDPR-compliant portal monitoring with, for example, moisture
receivers, private investors and charities. retains all documents, contacts, contracts sensors picking up leaks or other system
With an average instruction length of and information in one place. In use at malfunctions, so that action can be taken
13 years and an average tenancy tenure Moorfield’s The Forge and The Trilogy, before residents even become aware of an
of 3.5 years for private sector rents, VA is integrated with Building Link for issue. Now, systems can be interrogated,
ALM manages more than £1.5bn of a seamless journey to the residents’ faults diagnosed, and action can be taken
residential property across 7,000 units in portal, providing residents and staff with before breakdown. These advancements
over 100+ buildings throughout the UK. convenience, efficiency and the ability to mirror and support the regulation changes
ALM has gone from strength to strength serve customers 24/7 on a central platform seen in the last two decades, including
in its relatively short history and over the for all service and management needs. the introduction of Energy Performance
years has made significant investment Residents enjoy the 24/7 flexibility to Certificate (ECP) ratings, which measure
in technology to adapt to trends and manage communications and tenancy a building’s energy performance, as well
the changing nature of the operating matters at their convenience. This might as improved health and safety regulations. We were delighted to Brexit – how we got here The possible impact of
environment in order to serve its clients
and customers’ best interests.
be as simple as asking for an extra key,
accessing their inventory, arranging
The demand for high-quality service has
forced landlords and operators to up their
host ITV’s Political Editor, Robert explained how a perfect storm of the a second referendum
Robert Peston at Allsop,
impact of globalisation on jobs, stagnant The consequences of a second referendum
Advances in technology and the security a washing machine repair, picking up game. For investors and property managers wages, particularly those within lower income could be severe, according to Robert.
of on-line platforms has a parcel or scheduling a dry-cleaning alike, quality and breadth of service for where he shared some brackets, combined with poor productivity Not only could this lead to a split in the
service. Conversations about service residents is essential. Unhappy residents
had significant impact
on consumer services, related matters, rental or service charge move, resulting in more voids and disrupted hard, but interesting levels, exacerbated by quantitative easing
has created an element of society feeling
Conservative Party, a division not seen
since Robert Peel’s Corn Laws were
business efficiency payments, maintenance and other general rental revenue. Now, where landlords were Robert truths about disenfranchised and disconnected. repealed in 1846 which created two new
property-related functions are made easier once reluctant to allow pets, many more
and sectors, like
renting, where the and faster, thanks now recognise that happy, good residents Brexit. It is not all doom Robert highlighted the rise of social media
platforms and how they were being used
parties, but also cemented the view
among disenfranchised voters, that they
consumer votes with their to advances who see their asset as their home are likely and gloom, but it is to spread fake news and allow organisations are being ignored by the current system.
in technology. to stay for longer. In this way, the built to
feet. Thanks to the internet
and smart tech, With the rent sector in particular has brought the uncertain. Here is a to send persuasive and targeted digital
messages to swing voters contributed
demand for resident sharply into focus. quick recap of some to the vote to Leave. Much of the Leave
It is not all bad
This Government, he said, has done
instant service,
technology has
The pace of the letting and management
sector in 2019 is a far cry from what it was
of his key points. campaign fund was spent on advertisements
something right. Chancellor Philip
on digital platforms to appeal to an emerging
also enhanced in 1999. In terms of service, the industry has Hammond’s balancing of the books has
and influential demographic.
ALM’s back-office come on leaps and bounds and it is exciting helped to create a fiscal cushion for the
business systems, to imagine what the sector and ALM will look country, should we leave without a deal.
freeing up staff and like in another two decades. Regardless of May’s dilemma This cushion will give the Chancellor some
allowing them to offer such transformation, IT investment and A series of strategic events from the room should this happen and help to
a more personalised evolution, ALM maintains, at its core, a moment May took over from David Cameron alleviate the impact of a no-deal scenario.
client and customer culture with a strong focus on quality of has meant that we are now embarking on
services. Indeed, service to clients and customers alike, leaving the EU without knowing or having
‘service’ is the current and will always welcome a good old chat, a vision of what a future trade deal with the
buzz word in just as it was 20 years ago. Some things EU will look like.
residential property. have stayed the same, as they should.
Whether for serviced
27 28You can also read
