Market Update

The ongoing credit crunch continues to plague the financial world and has impacted on the real economy in a number of significant ways, not all of them in our opinion, in a negative way.

As we reported to you last time, banks have become so nerve shattered that virtually no sensible lending is available in the commercial property market. A number of banks are beginning to experience serious problems with their loan books, as clients breach lending covenants and most relationship managers are spending their time trouble shooting overstreched, high end property deals, in both the commercial sector and residential sector of the market, rather than looking into writing new business. This situation, as values continue to fall, will only become worse.

Those companies and banks not particularly affected by the squeeze can see real value coming back into the market, and some are poised to take advantage of the situation, to build high yielding portfolios, offering attractive margins and income cover for their lenders.

The rebalancing of the economy away from the financial services and consumerism towards manufacturing and other sectors of the economy in the medium to long term, is we believe also a positive thing.

We, as a company, can only really comment upon our particular market which is niche in nature, being entirely focused on Industrial / Warehouse property located in the South of England. Once again, this area is the most resilient to any market turmoil with its highly diverse and sophisticated business community.

We continue to experience healthy demand from occupiers seeking economical accommodation in our trading area and have completed a number of transactions since we last reported to you. 90% of these deals were freehold sales to owner occupiers. The key word here is 'value'. Owner occupiers and tenants alike demand value for money.

Our business model is well placed to provide suitable property for the type of enquiry we receive, i.e economical, functional, well located, and modernised accommodation.

We continue to monitor pricing to reflect market conditions, so that our product is of the highest standard at the most affordable price.

Most of our customers seek our opinion upon the ability to finance their purchase in these difficult times. Very encouragingly, mortgages are available from banks to fund established businesses, particularly where they have established relationships with a bank. Margins are up and average deposits required range between 25% - 30%, but the improving affordability in the market more than outweighs increased costs. We see this as nothing new, but a return to more sensible financing practices, as long as banks continue to support their customers during these uncertain times, than in the medium to long run both parties will undoubtedly benefit.

We anticipate that interest rates will be 2% by next Spring.

Overall the next twelve months will produce a drastically different market to the one that has prevailed for a numer of years. However, perhaps in the medium to the long term, it will be seen that a correction was needed in both commercial and residential markets and that a more realistic financial and property market can emerge.