At 8.30 am on the morning of Tuesday 20 September the view from Standard Life’s offices on the 34th floor of the Gherkin was clouded, columnist Peter Bill writes in his month Letter from London.
A bit like the real estate team’s view on how many financial jobs will be lost in the City thanks to Brexit...more of which later. To sugar the pill, let me say that there is no more solid a bunch of real estate experts than those at Standard Life, which has AUM of £18.7 bn (€21.7 bn). For five years now the team, headed by David Paine, has set out a level-headed view of the future from its City eyrie. ‘Relax’ is the message.
This year there was some looking back to a less relaxing moment. What took place when Standard Life was forced to close the £2.7 bn (€3.1 bn) UK real estate fund on 27 June due to a surge in redemptions after 23 June, the day of the Brexit vote. Paine said vulture funds swooped, offering to take stock off their hands at deep discounts. They were flapped away. Locking the cash box worked. Later, punishing redeemers with a 6% penalty worked. Stock has been sold slowly at discounts of around 5%. Paine said the fund will soon open fully.
The question I asked of Anne Breen, Standard Life’s head of real estate research and strategy was this: ‘how many jobs will be lost in the City as a result of the UK leaving the EU?’ The question was asked only after Standard Life said it ‘anticipated some erosion of jobs’. A provocative graphic was flashed up showing how financial services jobs had doubled to 800,000 between the Maastricht treaty in 1992 and today. Will the numbers halve again?
Breen wisely evaded giving an answer. Those looking for a number might want to extrapolate from her view that annual City office takeup will fall from 5 million to 4 million sq ft (464,515 to 371,612 m2).
Be alert to unwritten rule changes
On 19 September the City of London Corporation published a 75-page consultation document snoozily entitled: Local Plan Issue & Options. Stay awake. Those alert to the subtle post-Brexit shifts of meaning in planning policy will be the first to seize opportunities gifted by a sub-textual analysis of the bland verbiage.
The City Plan 2036 – Shaping the Future City will not be adopted until 2019. By then it will be too late to capture property or land that is liable to outperform when developed in order to exploit changed planning rules. Wise global investors should elicit expert local opinion as soon as possible. Locals will already be in the know.
Planning committee
For those content with inexpert opinion, here are a few points. Planning decisions were taken for many years by chief planner, Peter Rees, then rubber-stamped by an elected committee. Rees left in March 2014. His capable deputy Annie Hampson has taken over. All is working well. But...there is a desire among a new breed of councillors to become more closely involved. Those seeking guidance would be advised to get to know planning committee chairman, Chris Hayward and his deputy, Alastair Moss. This advice is not spelt out in The City Plan 2036 – Shaping the Future City, naturally.
There is a plan to extend the tall-tower cluster, centred on the Cheesegrater, south towards the river. The plan has actually been drawn up, but is not shown in the discussion document. The advantage to Londoners will be hiding the Walkie Talkie. The advantage to investors holding correctly located freeholds is incalculable. There is waffle about the need for large floorplates and stuff on the impact of technology. Forget that, see what Standard Life says.
But one interesting point is a proposal to draw a line around a new ‘commercial core’, or CBD in any other city. The idea half-concedes a loss of influence post Brexit. But it also points to looser rules outside the core. The guidance question is worth repeating in full, for the benefit of those with holdings outside the core. ‘Should we protect an identified “commercial core” where only offices and complementary commercial uses will be permitted?’ Outside the core, should we be more flexible, allowing a mix of land uses, including housing and hotels? Er...yes.
Peter Bill is author of Planet Property and former editor of Estates Gazette
