Valuers lift material uncertainty clauses on industrial and BTR

RICS has recommended removing material uncertainty clauses on assessments for all industrial and logistics real estate, as well as institutional-grade build-to-rent properties. The move is a positive sign that the industry has taken a step closer to resuming business as normal. Valuers across the major agencies relaxing these clauses with immediate effect include JLL, CBRE, Savills, Knight Frank and BNP Paribas, alongside other members of RICS’s material valuation uncertainty leaders’ forum. Ollie Saunders, head of UK valuation and alternatives at JLL, told EG: “We have seen a number of transactions and demand in these sectors that give us enough reference points, as valuers, to understand with more certainty how assets are priced. It’s quite a turning point.” Saunders expected that MUCs will still be used with “some” types of industrial assets, particularly in the secondary end of the market, but that these will only apply to a relatively small number of cases. The latest update follows the earlier lifting of MUCs for long-dated annuity income at the end of April. This was followed last month by standalone food stores let to national covenants, as well as primary healthcare. MUCs for specialist supported housing, social housing and non-reversionary residential ground rents have also been withdrawn. However, firms continue to await clarity on remaining categories including offices, alternatives such as student housing, and retail. Saunders said: “As we see more transactional activity in other asset classes … those MUCs will be lifted. We haven’t yet seen enough deals in the student housing market, for example, but as they happen, we’re working hard to make sure they are lifted in the appropriate time.” He also noted the valuation community has become “more transparent” as a result of Covid-19, as well as its processes. “MUCs have been applied twice before – during the global financial crisis, for about eight months, and after the Brexit results,” said Saunders. “This time, we have been open and transparent about firms showing a lot of comparable evidence, to ensure we are lifting MUCs at the appropriate time.” Valuers remain on high alert, however, should there be a second wave of coronavirus infections. “Hopefully it won’t be the case, but if there is a second wave, and we see a substantial fall in the number of transactions and find it difficult to observe pricing in the market, MUCs will have to come back,” Saunders said. “That is the reality of 2020, I’m afraid.” RICS’s material valuation uncertainty leaders’ forum comprises: Colliers Savills Cushman & Wakefield EY Gerald Eve Avison Young JLL BNP Paribas Allsop Knight Frank Deloitte Montagu Evans CBRE To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette