UK - The UK property market is approaching fair value, but it has yet to face the fall-out from an economic downturn, according to British Land CEO Stephen Hester.

In an interview with shareholder channel Cantos, Hester said the recent price correction and outward-moving yields were "rationally justified" by stressed conditions.

"Property as an investment asset class is impacted by all the uncertainties that have impacted other investment asset classes. The UK has fallen further than any other market, with more transparency," he said.

However, he added the main impact of broader financial market turmoil would be to weaken tenants, resulting in slower rental growth.

"We're working towards the end of the financial market correction, but [we're] still at the earlier stages of assessing what the real economy is doing to our customers," he said.

Meanwhile, Toby Courtauld, chief executive of Great Portland Estates, said he remained optimistic the current downturn was "structurally" different from that in the early 1990s, citing strong corporate balance sheets, and lower interest rates, inflation and vacancy rates.

He forecast London's West End - the firm's primary focus - would continue to outperform the City because it was less dependent on the occupational market.

"We've said for some while that we thought that would be the case - fundamentally because the supply and the demand dynamic of the West End is completely different to that of the City. There is still at or near a record low of grade A supply in the core of the West End, and I think that is going to give it some pretty defensive characteristics for the rest of this year."

Despite a predicted slowdown in demand, "it's slowing from a very high level," said Courtauld.

The two property bosses defended their mitigation strategies to date.

Hester said restructuring in recent years - British Land, which has ABP as a major shareholder, turned over 60% of its assets - reflected capital and rental growth plans designed to hedge against the downturn. The plan also included a £3bn (€3.75bn) asset sale aimed at reducing gearing and a refinancing of its remaining debt.

Growth, he said, had been the result of "hundreds of little actions - rent reviews, lease restructurings, changing units for our customers".

Meanwhile, Courtauld defended the decision by GPE - which has six pension funds as shareholders - to build up £280m war chest over the past year.
"We're in a good position to take advantage of opportunities when we see them, principally because we've spent much of the last year making sure we're as liquid as possible," he said.