Goldman Sachs sounds alarm on UK commercial property
Goldman Sachs has warned that billions of pounds could be wiped off the value of UK commercial property because of the sharp rise in borrowing costs following the government’s “mini” Budget.
Analysts at the bank published a gloomy outlook for a string of listed property companies, including Hammerson and British Land, and said they now anticipate prices across UK commercial real estate will fall between 15 and 20 per cent between June this year and the end of 2024.
The bank’s warning adds to growing alarm that UK commercial property is heading for a painful price crash. Rising interest rates have increased costs for owners of offices, shops and warehouses, just as they have homeowners looking to secure mortgages.
Columbia Threadneedle, one of the UK’s biggest institutional property investors, suspended dealing in its £453mn UK property fund earlier in the week after a surge in redemption requests, following similar moves by three other UK funds a week earlier.
Even before the budget, pension funds were looking at reducing their property investments.
Shell’s pension fund recently put its UK property portfolio worth almost £600mn up for sale, though the company said this was “part of our long-term plan to reduce the investment risk in the [fund],” rather than a response to the budget.
Property owners with large portfolios are exasperated by the effects of the budget, which came as the market was already showing signs of turning after a long bull run underpinned by low rates.
“[The government] talks about ‘growth, growth, growth’, but borrowing costs are up massively. It’s madness . . . we will just have to battle through it,” said the boss of a FTSE 100 property group.
This story originally appeared on: Financial Times - Author:George Hammond
