April 26, 2019
This article originally appeared in Property Week on Thursday 25th April 2019, written by Mike Prew, Managing Director at Jefferies.
The real estate market has had its ‘Cinderella moment’. Midnight has struck, exposing the REIT ‘pumpkin eaters’ left holding unsaleable assets at high valuations. Retail values cracked but REITs portrayed this as a one-off.
Intu said that its shopping centre yields rising 62bp “have done their stuff” and the investment market “wouldn’t remain asleep forever”, but this probably isn’t the end of the beginning; rather the beginning of the end.
The fast-casual dining and flexible office booms have extended this cycle but are less able to soak up excess retail and office space respectively, which has sustained headline rents. Real estate leases are losing their defensiveness as they shorten and security is debased by CVAs, WeWork leasing via SPVs and Regus handing back the keys at Stockley Park.
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