New wave of distressed sales expected in New Year

A new wave of distressed properties is expected to come to the market at the turn of the year as funds struggle to meet investor redemptions and companies fail to meet bank covenants, according to Kim Politzer, European research manager at investment manager Invesco Real Estate.

'We believe that after the December valuations many companies will not be able to cover bank covenants, and this may force them to put more assets up for sale,' she said in an interview with PropertyEU.

According to Politzer, Invesco Real Estate will be focusing on opportunities in the UK market coming from distressed sellers, while being very wary of the retail property sector which has recently been hit by oversupply and falling consumer spending. 'We believe that timing will be crucial in the next 12-18 next months. We think it is worth being overweight in the UK right now because the British market has already overshot and we think that yields will stabilise next year in the country,' Politzer said.

According to the latest Invesco RE House View research report, office yields in the UK widened by a further 50-75 basis points in the first six months of 2008.

Politzer also suggested that the European Continent is likely to become more interesting in due course. 'France, for example, is likely to become attractive in a second round of re-pricing which we expect to take place towards the end of next year,' she said. Politzer expects prime office yields in France to soften by a further 100 basis points in the 12 months to June 2009.

While opportunity funds are often slated as being in the best position to take advantage of today's sharp readjustment in the value of UK property, Politzer pointed out that they have not yet been very active. 'Market watchers say they are waiting on the sidelines to strike but they are being very cautious but this might actually end up to be a rumour,' she added.