Anthony Wyld, head of marketing, Tritax, looks at the possibilities 2012 could bring
When news of Britain winning the 2012 Olympics bid was received, it only took minutes before the residential property boom produced speculative residential investors.
Several years on, residential developments in the Olympic vicinity appear to be fully occupied, and values have not fallen as fast as elsewhere. It appears that these pioneer residential investors have indeed had an Olympian dividend.
So, is there also a commercial property windfall to be had? Whilst demand for residential space does not contract if an economy shrinks, the amount of working space required does. Because of the recession commercial property values fell by around 40% between 2007 and 2009.
Comparing Olympic residential property in 2006 with Olympic commercial property in 2010 is complicated. So, is now the right time to look at the Olympics’ impact as post the correction in prices?
Perhaps the most obvious opportunity would be the Westfield Stratford City, which has all the scale of a major commercial property project.
Here, once again, one needs to contrast the features of a commercial property investment with those of a residential acquisition. Residential property is let on short leases to produce a moderate level of income, but with the main focus being on capital appreciation, which can only be fully realised when the property is vacant whereas occupied (let) residential property is less valuable than empty.
Commercial property also offers higher yields than residential, in the region of 6-8% pa as opposed to perhaps 4% net of costs respectively. Commercial property’s value is related to how long and secure that income is perceived to be, and a property left vacant will penalise its capital value.
Taking these considerations into account with the Westfield Stratford City, a commercial property investor would perceive strong demand for his space in the build up to, and duration of, the Games, but what happens afterwards?
There are some sobering examples of the fate of Olympic facilities and the Greek example is pure “tragedy””
