Commercial property “punching well above its weight”
A senior figure at the Bank of England came up with some interesting statistics recently, when addressing the City of London Property Investors’ Banquet.
According to the Bank’s executive director of financial stability, Alex Brazier: new office space completion in Central London is at a ten-year high; more than thirty schemes are underway (a twenty-year high); and transactions are near a record high – half of them financed by capital attracted from overseas.
Outlining his concerns, Mr Brazier, commented: “Commercial property is punching well above its weight in attracting capital to Britain … when commercial real estate catches a cold, the whole economy starts to shiver”. Notably, banks may be “injured” and small businesses see their own property fall in value – assets that are vital to secure their borrowing.
Mr Brazier appealed to property investors to exercise caution, saying: “Over-gearing of your industry has been a major driver of instability in the past, making you vulnerable to the slightest change in sentiment … in part that’s the result of lenders offering deals in the good times that present even the most responsible investors with an impossible choice: gear up to uncomfortable levels or be forced out of the market.”