Gap between prime and secondary property is growing, panel hears

Continued strife in the economies of the UK and Europe is causing a growing polarisation between prime real estate, prime locations and the rest of the market, was one of the key messages to come out of a briefing held in London earlier this week.

Panellists at the Outlook 2013: European Investment Briefing organised by PropertyEU agreed that investors are increasingly looking towards safe havens and overlooking anything but prime when they seek out new real estate.

Speaking at the event, Colliers International director Jonathan Baines said that much of the money coming in to Europe is heading towards UK but remaining in London, which continues to be seen by foreign investors as one of the safest targets in the region.

He said: ‘London, along with New York, is probably the most global investment market at the moment. There’s a lot of money coming in from Asia; they find London particularly attractive.

‘One if the issues that we’re finding is that there is this desire just to go for prime property with safe returns. People are slightly nervous about going up the risk curve’.

Echoing this trend, SJ Berwin partner David Ryland said: ‘One of the concerns is that there is an increasing polarisation between prime and secondary property that will continue. There’s a lot of secondary property that’s frankly very difficult to value where if the tenant became insolvent it would be increasingly difficult to re-let.' He added: ‘There’s an argument that quite a lot of that property could almost have a zero value because no-one’s going to lend on them’.

However Ryland noted that while this polarisation is a big concern for the overall market, there are cases where the challenge is being seen as an opportunity. He said: ‘It is a bit of a black box and there are opportunities there as well, where there’s something that’s near prime but not quite prime’.

The full report on the London Outlook Briefing will appear in the December issue of PropertyEU Magazine