Are real estate’s dark days here?

EDITOR’S COMMENT The holiday is now officially over. Liz Truss will be our next prime minister and inflation is now predicted to hit 22%. Those care-free days of sitting by the pool, drinking pinã coladas are gone. Things are about to get nasty. I hate to be a harbinger of doom, but fresh from listening to Emily Maitlis’ return to the airwaves on her new The News Agents podcast, I feel compelled to say what I see. Over the past week, I have written the words “receivers” and “administration” more than I have in the past few months. Those quiet undertones of businesses teetering on the brink feel like they are getting louder.  There are now very evident “unsustainable cash flow problems”, the post-Covid bounceback, the spending spree that came with the release from lockdown and mobility restrictions is drying up as just living gets more and more expensive. There is no “there may be trouble ahead”. There is trouble here. Now. And I am not the only harbinger of doom out there. Analysts at Berenberg put out almost 300 pages of bearish commentary this week .  “The past five to six years have been volatile for the sector, flipping between periods of rerating, net tangible asset decline and recovery as the UK muddled through the impacts of Brexit and the Covid-19 pandemic. However, current market conditions have shifted the mood music decidedly,” the Berenberg team wrote. The real estate market is in the “crosshairs” of recession and faces an environment that is “certainly the toughest in over a decade” say the analysts, adding any property owners hoping to offload any unwanted assets will have now “missed the boat”. Creditors to Guernsey-based Aberdeen Retail 1 and Aberdeen Retail 2 will be hoping that isn’t the case, however, as Cushman & Wakefield seeks to find a buyer for the 460,000 sq ft Bon Accord shopping centre in Aberdeen. The mall, once valued at close to £200m, was placed into administration this week and joins shopping centres in Woking, Surrey, and Craigavon, Northern Ireland, both being sold out of administration. Savills is seeking offers in excess of £25m are being sought for the 526,547 sq ft Peacocks Centre in Woking and £57m for the 30-acre Rushmere shopping centre and retail park in Craigavon.  The Berenberg team thinks retail is investable again so perhaps creditors to Aberdeen and Moyallan (the owner of Peacocks and Rushmere) will see some return. I am not convinced if I am honest. I think good retail is probably investable again, just like good office stock, leisure stock and, dare I say it, even good (not all) industrial stock, will weather this storm.  Owners of any assets out there that aren’t good, that aren’t grade-A or close to grade-A, however, better batten down the hatches. And any owners of those properties that aren’t up to scratch when it comes to regulatory changes or sustainability better hold on even tighter. Pick up next week’s issue of EG to understand more. But as much as the warmth of summer and that bright shining sun are waning, real estate always bounces back. There will undoubtedly be casualties along the way. But there will also be victors. There will be rising stars and fresh, inspirational, market-changing entrepreneurs who will find their footing during these tumultuous times. And as much as I have been that harbinger of doom this week, I promise that next week, as we reveal EG’s 2022 Rising Stars, I will lift you back up again. Every cloud, after all, has a silver lining. To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews