SBM

The Turning Point

I did say I was an optimist. We salute those clients who have kept going during this time. They understand that every successful business has a secure property base and we are thankful for our clients’ continued instructions during this time. 

We have communicated with as many clients as possible – with over 200 CFO/CEO conversations and counting. There’s no particular order – if we haven’t got to you yet, we will. The turning point happened last week in terms of the mood of the messages and some confidence returning. Lower than expected infection and death rates, HMRC’s furlough portal worked and 80% became 100% government backed loans, together with help for the self-employed.

If it’s not a turning point, it’s better than free-fall. Certainly there are plenty of reasons to be pessimistic. We are realistic but we will not deal in pessimism. At SBM we believe in positive action on behalf of our clients, future clients and team members.

Unsung heroes

Clapping for the NHS – is it a political act? This question is being debated at my daughter’s school. Surely, we should also be clapping for the cleaners and the nursing home carers as well as the pickers, packers, drivers and forklift truck operators who keep essential items and services supplied.

The unsung heroes of the private sector and the people on whom so much of what we depend upon, should be recognised too.

At SBM we regularly visit our clients’ factories and I always believe that our client interactions start from the moment we encounter the security guard, receptionist, office staff, machine operators and all those in high-vis. Our recognition of the countless unsung heroes is where SBM’s reputation is built. I would like to think that our client successes trickle down to our unsung heroes at the back of the office, on the factory floor and in the warehouse yard.

Case Studies

We bring our clients efficiencies and savings in relation to the properties their business needs and in turn we give our clients the option of reinvesting in their businesses. Over the next few weeks we will be telling you more about how our clients have benefited from our expertise.

The economy

I am still an optimist even though the IMF – under the best-case scenario – is predicting a cumulative loss to global GDP over 2020 and 2021 because of the pandemic of $9tn – more than the economies of Germany and Japan combined.

I am also optimistic because the recession was caused by a shock that came from outside the economic system. I am used to recessions being caused by over-consumption. In the current situation, with the right cash injections (which I believe we are getting) the economic situation will rapidly improve.

One of MFR’s economists commented “While there will be a bounce in growth rates as the economy is gradually reopened, returning to the levels of activity that prevailed pre-crisis is going to take a long time, and indeed probably will be measured in years for the most affected sectors”.

Savills reported that in the seven days after the March quarter payment date, they collected 60% of rent and 48% of service charge payments. In a best-case scenario, they see the economy and property market returning to ‘normal’ levels by mid-2021.

SBM’s research in commercial, non-retail rents indicates 70% of rents have been collected in March. Several major non-payers include Travelodge. Landlords are trying to close down Pizza Express due to non-payment of rent.

More than ever, the market as we know it has been interrupted and there are many instances of mis-pricing or non-pricing particularly in relation to illiquid products like occupational property.

Fastest ever commercial market

Over the last three weeks we have listened and spoken with many CEO’s CFO’s and other business leaders. Of these 45% are optimistic, 35% pessimistic with the remaining 20% still gaining situational awareness.

We have listened to more than 60 property industry professionals –  the economic shock has produced the fastest moving, most dynamic commercial property market in living memory with wider than ever divergence across property uses/classes/types.

From SBM’s perspective the speed of the commercial property market, caused by global government response to the Covid-19 threat is, in our opinion, compounded by:

– The financial position of individual businesses

– The financial position of individual landlords and investors

No longer is a property’s rental or freehold value a matter of quality and location. It’s a function of supply and the relative positions of the parties.

Time and Timing

A knee-jerk reaction is to suspend rent and wait for the phone to ring. There will be life after Covid-19 and at this time relationships will be more important than ever. Meaningful communication is therefore key. Approaching landlords at the right time, in the right way, with the right kind of offer is vital.

Through our experience and skills, our objective is to cut the cost of the property your business needs so that you have the option of reinvesting and hopefully benefiting the unsung heroes upon whom all our lives depend.

Here’s what you need to do:

– Work out approximately what your business is going to look like in six months’ time

– Think about distressed competitors that you can buy or parts of your business that can be sold.  I know you are doing this already but it doesn’t need to be perfect from a property perspective which is our bit.

– Consider all your locations and your need for them over the next three, six and 12 months. Longer if possible.

– Pull together core property information.

– Organise a call with SBM and we will put in place an initial property action plan.

Stephen Bleakley

Managing Director

 

Published: 29th April 2020

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