H1 2010 Professionals review

Comments (0)

Local authority asset sales, staff recruitment, increasing retail inquiries and an oversupply of offices are among the issues occupying the region's professionals as we mark the end of the first half and look forward to H2 2010.

John Holmes, head of planning, Hill Dickinson: Staff levels have been good and we have even recruited over the last 12 months in response to workload. Our workload is increasing in the areas of planning law and compulsory purchasing.

What we've found is that a large number of regeneration schemes underpinned by compulsory purchase have stalled but we have been winning second-phase work. Our order book is up and we have had one starter.

If there is going to be growth it will be steady. The public sector has been hit on a number of high-profile projects and a lot will depend on how the public sector works with private sector.

We need to wait and see what happens when the Localism Bill comes in towards the end of this year. The question is how to they cover the gap created by getting rid of regional special strategy. There will be a lot of pressure on planning authorities and we'll see a bit more contracting out. It's an interesting time but until we have a bit more flesh on the skeleton we can't predict accurately what will happen.

Phillip Woolley, partner, Grant Thornton: Given the scale of savings that are likely to be required following the coalition spending review, local authorities and other public sector bodies will need to undertake a fundamental review of their asset base as a core element of their efficiency programmes.

A recent report shows that the public sector holds £370bn of assets and a key driver to bring costs down will be the effective use of property assets. The public sector will need to consider disposing assets, entering joint ventures to reduce the costs and share the risk of new development and leveraging the value of existing assets. This can include sale and leaseback of property, or co-locating different services and departments in the same buildings.

We are actively looking for staff, Stephen J Benson

There is a risk that local authorities will, in seeking to make savings quickly, dispose of property for less than best value. That said, a strategic view should be arrived at relatively soon. The coalition will be keen to make the difficult cuts early, so public sector organisations need to have an understanding of the assets they have, how they are using them, the value of them and the ways in which they help them to function and fulfill their objectives. This will help them to make the right decisions and justify any expenditure.

It is worth bearing in mind that the public sector will still need to help drive demand for commercial property. Their involvement supports investment and creates jobs – there are a number of regeneration projects in the region which are underpinned by public investment and this will continue to be the case for the next few years.

John Jones, partner and head of corporate finance, Beever and Struthers: London commercial office space is highly sought after as a scarce resource but the picture elsewhere, particularly in the North West, is quite different.

It is often said that the region follows trends established in London but it might take a little longer this time around. The infrastructure of Manchester has changed dramatically over the past couple of decades partly fuelled by the Commonwealth Games, and latterly by the Spinningfields development and the prospect of Whitehall relocations to the city.

The result is oversupply and little or no development activity is likely until demand returns. Many property-based companies are carrying huge debt and the lack of demand means there are no easy solutions for their funders. Those with the most stamina will survive as in the aftermath of any recession, but many are playing a waiting game which perpetuates the benign outlook.

The resultant oversupply means there is a dearth of new development and the consequent failure of a number of long-established family-owned construction companies. They suffer from competitive tendering from larger players moving down the food chain to seek activity. This may get worse if there is the anticipated reduction in public sector spending.

There is nothing new in this prognosis. Demand will lead to recovery and demand will not increase until confidence reappears. The Budget is the best indicator of when confidence may return.

Bargain hunters have begun to appear, most noticeably in the residential buy-to-let arena. This may be seen as the first of the green shoots but, by and large, there is a discrepancy between offer price and that expected by the vendor. Some commentators suggest little in the way of an upturn until the late stages of 2011.

Stephen J Benson, senior partner, Cobbetts: Following the re-structuring of human resources which took place immediately following the downturn, stability has returned to staffing levels and we are actually looking at investing in human resource in those parts of the property teams which we see as emerging strongest from the recession.

We've had no voluntary departures and no starters other than qualifying trainees but we are actively looking. Private sector development work is bad but other areas are all improving.

I expect an increase in the quantity and quality of new instructions, Pam Jones

Our biggest issue is the lack of investment in the market and pricing. The market requires all law firms to think laterally about pricing and risk sharing.

The Legal Services Act is always in the background but at the moment is more noise than action. The budget changes are not likely to have major impact on the sector. CGT hasn't gone up as much as feared and capital projects are safeguarded.

The business failure/recovery market has been unexpectedly flat but this is likely to ramp up as recovery accelerates. Our order book for H1 was steady and we forecast improvement for H2.

Pam Jones, head of retail property, Hill Dickinson: The biggest single issue affecting the retail sector continues to be the credit crunch, although things are slowly starting to improve.

The retail sector has not had an easy ride so far this year, and it isn't just the economic situation that is causing it problems. The press seems intent on vilifying retailers, and the government has joined on the bandwagon with the Groceries Market Investigation (Controlled Land) Order 2010, passed in April, which requires the large supermarket chains to release certain existing restrictive covenants and exclusivity agreements.

Despite this, there have been fewer business failures in the retail sector this year than I think any of us expected.

From our own perspective as solicitors to several high-street retailers, including the Co-operative Group, work levels have increased in the first half of 2010, although our staff levels remain slightly down. I fully expect to see a continued increase in both the quantity and quality of new instructions in the second half of this year.

Iain Mowat, head of quantity surveying, The Vinden Partnership, Bolton: Industrial is one of the better performing sectors due to the fact that oversupply is diminishing. Businesses are grabbing the opportunity to acquire high-quality space that may not have been available a couple of years ago. Conversely, the retail sector is undoubtedly still one of the more difficult areas due to the fall in consumer spending since the recession began. The situation, unfortunately, isn't likely to improve, with spending set to be squeezed further.

One of the biggest issues for a lot of businesses at the moment is getting paid on time for work that has been done – late payment is definitely a problem that has intensified since the onset of the recession.

Staff levels remain unchanged but our order books are improving after what has been a challenging couple of years for the property sector.

Chris Fry, head of property, KPMG North: The amount of development work has obviously fallen off but we have been able to refocus on corporate restructuring, working with companies and banks. We have not seen a change in staff numbers across tax, transactional or restructuring work in property.

Transactional work is starting to come back as a lot of people are making the decision to sell now as they realise there is not going to be a sudden uplift in the market again.

There are clients of ours who sold out at the right time starting to come back in to the market now. Demand is highest for good quality offices. Banks are taking a sensible approach so far, not releasing all their bad assets at once, but there will come a time when they need to decide where they need to hold on to sites and buildings long-term and where they should let go.

On the construction side, I worry that public sector spending cuts will hit the construction industry, especially as it could take some time for the private sector turn to come.

Your Comments

Subscribe to our newsletter