Category Archives: News

‘THE CRE LENDING BLACK HOLE’

October 2018:  Chairman of the PIA Long-term Value Methodologies working group, Rupert Clarke, issues report ‘THE CRE LENDING BLACK HOLE’

Research undertaken has revealed for the first time that UK banks collectively made no profit from real estate lending during the market cycle from 1992 to the 2008 crash. Authored by Rupert Clarke, a 35-year veteran of the real estate and financial services sector who was previously chief executive of Hermes, the report says commercial property lending generated profits of c.£7.0bn during the last cycle. This was dwarfed by £19.3 bn of write-offs, mainly from loans made towards the end of the cycle.

Bad commercial real estate (CRE) loans were a large part of the reason HBOS and RBS needed bailouts a decade ago. According to the research, produced for the Property Industry Alliance, an umbrella group of listed property firms and fund managers, these problems were not unique to 2008: banks also failed to profit from lending to real estate during the previous two cycles – a period spanning over 50 years.

According to the report, at the lowest point in June 2009, more than £50 billion of capital was at risk of total loss. The research says that loan-to-value (LTV) ratios (a measure of how much value risk is being taken) were not adjusted to reflect increasing risks as property market values rose significantly towards the end of the cycle. It is vital that as the cycle progresses, LTVs should be proactively managed to reduce risk.

Clarke is calling on banks and their shareholders to take a more proactive approach to ensuring institutions have strategies for lending towards the end of cycles and processes in place to fully understand the risks they are taking on.

Lord Adair Turner, chairman of the Institute for New Economic Thinking and chair of the Financial Standards Authority between 2008-13, said:

“Commercial real estate lending has been central to almost all financial crisis of the last half-century. This report explains why, revealing the huge financial impact of irrationally exuberant late cycle lending which destroys value in the industry and in the wider economy. Any banker, real estate investor or regulator who wants to learn the lessons of the past should read the report, and design strategies to avoid similar mistakes in future.”

Rupert Clarke, chair of the Property Industry Alliance Long-term Value Group, said:

“Organisations, and those that run them and invest in them, need to be confident that CRE lending activities are sustainable and that appropriate governance is in place. It’s vital lending activities are not only well managed and successful in the short term but robust and sustainable throughout all stages of the lending cycle.

“Investors, banks and regulators need strategies in place to address specific challenges around lending during the latter part of property cycles. Without such measures, future cycles will continue to see shareholder capital eroded and economic stability undermined.”

Saker Nusseibeh, chief executive of Hermes Investment Management, said:

“Sustainable investing demands that Boards, investors and shareholders have strategies that deliver value over the long term. The findings of this ground breaking report on CRE lending make it clear that all the stakeholders in CRE lending, both in the UK and internationally, need to commit to putting in place strategies and governance that fully recognise the lessons from the past.”

The research concludes that the “profitability Black Hole” from CRE lending was almost certainly experienced in previous UK property cycles. Given the similarities between the UK CRE lending market and others internationally, it also concludes that other CRE lending markets internationally have experienced similar through-the-cycle profitability challenges.

FOUR REASONS FOR THE FAILINGS

The report identified four key behavioural reasons behind lending organisational failures:

  1. Peer Pressures: Fear of Reducing Market Activity “too early”: The financial markets are extremely competitive with direct and indirect peer pressure to grow profits. Reducing exposures (and profitability) when the market is performing well goes against the grain for all stakeholders.
  2. Organisational Inertia: The best analogy is the fable of the “frog in the water pot” failing to notice the temperature gradually rising towards boiling point. Traditional lending criteria and the gradual and progressive heating up of the market lulls the stakeholders into a false sense of security.
  3. Short term horizons and failing to look at the big picture: Although the mathematics of the cycle should be obvious to anyone looking at the big picture, because the focus of the governance chain (lending team, risk committee, board, analysts, shareholders) is generally short term, CRE lending strategies and activities have seemingly been completely blind to the magnitude of end of cycle risks and their impact on full cycle profitability.
  4. Lack of Clear End of Cycle CRE lending Strategies: For some reason organisations have failed to recognise that they need specific and well thought through strategies that anticipate and pre-empt default organisational behaviours which almost certainly will exert pressures to keep on lending in spite of all the warning signs. However, with almost no exceptions, lending organisations have not had (and still do not seem to have) any specific end of cycle strategies, with many being of the view that, because each cycle is different, it is simply too difficult to predict the end of the cycle. Unless there are extremely clear and unambiguous warning alarm bells, lending organisations will generally keep on lending even if the market is looking overheated. Waiting for everyone to agree that all metrics emphatically signal that the market is overheated is definitely leaving it too late.

Peter Cosmetatos, chief executive of lenders’ trade body CREFC Europe, commented:

“We shouldn’t be too surprised to learn that commercial real estate lending, crucial as it is for supporting investment in the built environment and real economy, is a difficult business to make money from.  In such a highly cyclical market as commercial real estate, those joining the party late in the cycle are most obviously at risk, skewing the profitability picture for the market as a whole.  Having said that, any lender would be wise to have a strategy for managing the peak of the cycle, and both regulators and investors should want to understand and support such strategies.”

Phil Clark, co-chair of the Property Industry Alliance (PIA) Debt Group, said:

“This report is an important addition to the industry’s ongoing research and initiatives on the UK CRE lending market, based around some of the recommendations from the 2014 ‘Vision for Real Estate Finance in the UK’ paper. The Property industry Alliance continues to work on the key initiatives of long-term value research and in establishing a CRE lending database, both of which will deliver greater transparency across the UK CRE lending markets. The analysis within the “CRE lending Black Hole” paper makes it very clear that end of cycle strategies are required to ensure that the CRE lending business model is sustainable.”

CRE Lending Report

Property chiefs launch AMV

Press release – Tuesday 7 November 2017

Property Industry Alliance (PIA) Debt Working Group

UK property industry launches quarterly metric to warn lenders and regulators when price rises should signal lending curbs

  • By understanding how overvalued property is relative to trend, banks and regulators can act to cut exposures
  • Aim is to cut lending risks at market peak by providing early warning system. Current values 10pc above norm
  • Adoption of metric by lenders and regulator will reduce risk to the UK financial system, say experts

Property chiefs have launched a new metric to sound an early warning for lenders and regulators when commercial real estate (CRE) values lurch too far above long-term norms.

The adjusted market value (AMV) metric – one of three that was proposed – is effectively a percentage determination of how overvalued UK commercial property is. It has looked back over previous cycles, crunching data to work out how far values could go before a market crash becomes almost inevitable.

The move follows a series of research papers and is designed to allow regulators to rein in lending when the market gets too frothy – while helping banks better understand the risks they take at various points in the property cycle.

Based on the MSCI IPD All Property index for Q3, it shows CRE values are 10 percent above long-term average, once inflation is stripped out. It gives a 50 percent risk of prices falling by 30 percent within the next five years – rising to 100 percent if values hit 20 percent above average.

In the past, every time values have exceeded 20 percent above average, prices have crashed by at least 30 percent in real terms, research shows [see notes].

However, experts have emphasised that current lending levels are far more conservative than in the period leading up to the last crash.

According to De Montfort University (DMU), which surveys UK property lending each year, average loan-to-value ratios today are around 60 percent compared to around 75% in 2006/7

By adopting AMV, the property industry hopes that the Bank of England can pull regulatory levers to cut lending as a proportion of market value when those values rise avoiding a repeat of 2007.

Rupert Clarke, chair of the PIA debt group and managing partner at Lipton Rogers, said:

“Our ambition is that all lenders – banks, funds and debt funds – hard-wire this methodology into their risk metrics, become more cautious when it starts to hit amber and take decisive action when it moves into red. At the moment the vast majority of lenders have no clear action plans to prevent themselves from being sucked in the CRE lending “black hole”, lending too much against overvalued properties at the end of the CRE cycle.”

Peter Cosmetatos, chief executive of CREFC Europe, which represents property lenders, said:

“This is about giving regulators and banks a relatively scientific warning system to prevent lenders overextending themselves in a boom, suffering losses that prevent them from lending after a crash when the economy most needs credit.  Adjusted Market Value isn’t a panacea – it needs to be used alongside other metrics, not least lending data – but its regular publication is a step change in promoting better property lending risk management.”

Rupert Clarke added: “The reasons we need this metric are that lenders and regulators consistently fail to recognise the risks at the end of the cycle, allowing their loan activity to spiral as property becomes increasingly overvalued, resulting in huge losses and the risk of financial meltdown.”

Charles Cardozo, director at Radley & Associates, said:

“This is the start, not end of the journey, as further technical work will need to be conducted on the methodologies to analyse and fine-tune the models. Rather than seek to alter the way market values are determined, what we’ve attempted to is offer a solid basis to supplement the information available to lenders and the regulator, with a metric specifically intended to inform risk management and regulatory capital requirements.”

Vicious circle as price increases spur lending

Lending activity usually rapidly increases towards the end of a property cycle. CRE values sore, and as lending grows too, this amplifies risk. Because lenders are incentivized to lend money, the majority of losses are linked to end of cycle loans.

DMU’s research showed that after lending a record breaking £82bn in 2006, 89% of CRE lenders planned to increase their new lending activity in 2007. All last cycle CMBS write-offs related to issues between 2005-7, according to Fitch.

Led by the Property Industry Alliance (PIA), a collection of trade bodies representing investors, developers, surveyors and lenders,, the risk analytics consultancy, Radley & Associates, has developed AMV to show the percentage by which prices are above or below their long-term historical trend level based on all types of property and establish the probabilities of such overvaluations leading to major falls in values

The majority of the work has focussed on establishing the vulnerability of the market as a whole using MSCI IPD’s headline benchmark. At present, there is no  mechanism to establish a similar clear link between overvaluation of any particular sub-sector, such as retail or City offices, and an impending crash due to insufficient data.

Since the 2007 financial crisis, central banks and regulators have employed mechanisms such as slotting which demand increased levels of regulatory capital to be set aside by lenders. While it is now seen to have been relatively effective at constraining excessive CRE lending, slotting is not applied consistently and there is certainly opportunity for growing competitive pressures to start loosening those constraints in future.

Years of research

The UK property sector has spent years analysing how it could avoid another massive market failure. In 2014, it published a milestone report A Vision for Real Estate Finance in the UK which set out how lenders and regulators could better understand and manage the risks that occur during every property cycle.

The Vision report identified a number of measures to usher in a “more stable, efficient, diverse, and transparent market with greater liquidity, lower risk and better pricing”. And in June 2017 a follow-up report exploring three alternative long-term value methodologies was published by a PIA debt working group, led by former Hermes Investment Management chief executive Rupert Clarke, a former BPF president who is now managing partner at Lipton Rogers, a development business formed with Sir Stuart Lipton and Peter Rogers.

Objectives of AMV

  • Dampen credit growth during a boom, reducing the potential for regulated lending to feed a CRE bubble by breaking feedback loops between valuations and lending
  • Avoid discouraging relatively low-risk CRE lending after a crash, when investment in the sector is most needed.
  • Establish a through-the-cycle measure against which point-in-time collateral values can be compared on a loan-by-loan, loan-book, sub-market and market basis, to facilitate understanding of where in the cycle the market sits at any particular moment.

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Long term value report

This report is an initial analysis and reconciliation of the characteristics of three alternative long-term value methodologies; Adjusted Market Value, Investment Value and Mortgage Lending Value, compared to market value.

View the report

Property industry leaders announce breakthrough in mission to reduce the risks of commercial property lending boom and bust

A decade after the last UK real estate peak, ‘Adjusted Market Value’ analysis can now be used to reduce risk of commercial property lenders fuelling then being overwhelmed by the property cycle.

July 3 2017– Ten years ago, at the end of Q2 2007, an overleveraged UK commercial property market finally reached the end of a long bull run.

Over the next two years, values dropped by 42% and UK commercial property lenders were looking at huge potential losses, with Lloyds/HBOS and RBS being bailed out by the UK taxpayer in October 2008. The UK economy today still bears the financial fallout and scars.

But new industry research, published today by The Property Industry Alliance (“PIA”), concludes that, if lenders and regulators had had access to suitable long-term value metrics in the period leading up to the 2007 crash, they could have anticipated the extent to which commercial property was becoming overvalued and seen that a major crash was looming.

Not only that, lenders and regulators could have reached that conclusion three years before the market eventually peaked.  As lending volumes typically increase greatly at the top of the cycle, this would have given them sufficient time to moderate exposure and ensure they were better positioned to manage the major downturn that followed.

The Property Industry Alliance (“PIA”), which brings together leading representative bodies from the UK commercial property industry, acting through its Debt Group, today releases the results of its two year research project focused on identifying effective long-term value metrics that can be used by lenders and regulators to help identify periods of significant overvaluation and anticipate major crashes.

The research paper was born out of one of the key recommendations of an independent industry report, “A Vision for Real Estate Finance in the UK”, published in 2014.  The Vision report made recommendations for reducing the risks to financial stability posed by the commercial real estate cycle.

One of the key recommendations of the Vision report was that long-term value metrics should be developed to help lenders and regulators understand how current property prices compare to a more sustainable, long-term concept of value.  The Long-term Value research analysed the performance of three different “Long-term” value measures and their ability to predict crashes, using historic market data.

The most reliable of the three proved to be “Adjusted Market Value”, which compares current market values to a long-term trend derived from the inflation-adjusted long term capital value index.

AMV-overvalue-signals

Correlation between AMV overvalue signals and actual subsequent five-year value falls

This method weighs up whether values are rising above levels where, historically, crashes have taken place before.  By using this information to moderate new lending, lenders and regulators could take action to reduce the risk of lending losses when market values fall.

While the property cycle cannot be prevented, this work seeks to reduce its impact on the financial sector – something that may also serve to reduce the amplitude of the cycle by limiting the extent to which debt drives it.

As part of the findings, the report also recommends that further research is undertaken to develop the Long-term Value metrics further, including at sector, subsector, portfolio or individual property levels.

The important next step is to explore how the metrics could be best applied by individual lending institutions and, indeed, regulators, to better manage the cycle: reducing losses from exuberant lending at the peak, and improving lending appetite after a crash when the economy most needs credit.

The PIA Long-term Value working group that conducted the research included representatives from the Bank of England, the valuation industry, rating agencies, academics, researchers and the major UK clearing banks.

Rupert Clarke, the former CEO of Hermes, who chaired the research group, said: “The biggest challenge facing property lenders and regulators is how to avoid catastrophic write offs at the end of every major market cycle. This Long-term Value research is a game changing breakthrough for the proactive management of end of cycle systemic risk. The vital next step is to make sure lenders, regulators and all the lending stakeholders grasp the nettle and resolutely hard wire Long-term Value techniques into their risk management framework.”

Phil Clark and John Gellatly, co-chairs of the PIA Debt Group, added: “This research is an important milestone after almost a decade of work undertaken by the PIA and the wider industry to understand the scale and complexity of commercial real estate lending activity in both the boom and bust phases of market cycles.

“Specifically, it builds on the foundation established by the Vision report and is a major step towards reducing the risk posed to the UK financial system by the next commercial real estate crash. The report identifies further work required to improve, as well as increase awareness and understanding of, the effectiveness of Long-term Value metrics and how they might be used.

“This is essential in order to ensure recognition and adoption of these types of methodologies in the lending and regulatory process.”

Peter Cosmetatos, chief executive of commercial real estate lending trade body CREFC Europe, said: “We welcome the publication of this research, which will be of interest to many of our members.  Any metric that can be shown to give reliable advance warning that a major fall in property prices is likely could play an essential role in helping lenders manage cycle risk and avoid some of the errors of the past.

“We look forward to exploring how the industry might best build on this work to support responsible and sustainable commercial real estate finance markets.  From a regulatory point of view, we believe that it is particularly important to avoid unnecessarily distorting competition across different types of lenders subject to different regulatory and capital frameworks.”

Further information:

Giles Barrie, FTI Consulting: 0203 727 1042, giles.barrie@fticonsulting.com

 

Real estate industry focuses on Brexit opportunities

Following confirmation by the Government on its outline plans for the UK’s departure from the European Union, the Property Industry Alliance (“PIA”) has come together to identify the opportunities and key considerations that the real estate industry needs to take from Brexit.

The PIA, which brings together leading representative bodies from the UK’s commercial property industry, has also identified five key areas for the Government to consider. The industry group recognises that while Brexit poses risks to the real estate industry, it also opens up opportunities if the Government takes the right steps.

  • CAPITAL

Overseas investment in UK commercial real estate is a highly significant driver of GVA and productivity, and must not be put at risk by Brexit. Foreign investors own 28% (£135bn) of UK commercial real estate held as investments (more if housing and student accommodation are included). They also often partner with UK investors and other organisations to drive UK regeneration.  An effective and efficient commercial property market produces investment in the physical and digital, the fabric of towns and cities across the UK, creating jobs, improving environmental performance and generating at least £16bn directly to Government through taxation.

  • SKILLS

The real estate industry (including investment/asset management and construction) is highly reliant on the mobility of workers and is already experiencing a skills shortage. We need a post-Brexit response that focuses upon training, skills and the ability to attract and retain talent.

  • CONSTRUCTION /DEVELOPMENT

EU public procurement rules are inefficient, often misunderstood and therefore uncertain. Brexit offers a real chance of streamlining the system, which will increase the velocity of investment by reducing unnecessary costs and delays.

  • TAX

A simplified and fairer tax regime for the real estate and infrastructure sector post-Brexit would increase domestic activity, retaining and improving our competitive position for investors. The most obvious opportunity is VAT, where the UK’s freedom of action has been constrained in unhelpful ways by European law and the case law of the European Court of Justice.

  • SUSTAINABILITY

Brexit represents an opportunity to revamp the complex and somewhat inefficient environmental sustainability regulatory framework, to provide better more efficient long-term solutions and green growth. We would undoubtedly want to retain some UK legislation derived from EU rules, reform other areas and indeed remove particularly ineffective laws.

Bill Hughes, Chairman of the Property Industry Alliance, said: “Real estate is a critical and enabling part of the UK’s economy, shaping our towns and cities and channelling productive investment into the real economy.  The UK asset management industry is one of the largest in the world and a key contributor to the UK economy. Within it, real estate is a core investment asset for private and professional investors, both domestic and global, particularly for its income-generating characteristics. The ability of the industry to continue to undertake cross-border activity from the UK and retain mobility of talent is crucially important.

“The Property Industry Alliance plays an integral part in explaining the role that UK commercial property plays in the UK economy, its importance in improving the built environment and its wider social contribution to local communities. As such, it is critical that we do not sit and wait to see what a post-Brexit world might look like. We have the chance to shape our real estate industry for the benefit of the UK.”

The members of the PIA are the Association of Real Estate Funds (AREF), British Council for Offices (BCO), Revo (formerly BCSC), British Property Federation (BPF), Commercial Real Estate Finance Council Europe (CREFC Europe), Investment Property Forum (IPF), Royal Institution of Chartered Surveyors (RICS) and the Urban Land Institute (ULI).

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For further information, please contact:

Tom Gough
Head of Communications, Legal & General Capital and LGIM Real Assets
020 3124 2777

Faye Walters
PR Manager, LGIM Real Assets
020 3124 2823

UK commercial property value reaches all-time high

The value of the UK’s commercial property stock reached an all-time high of £871 billion in 2015, representing 10% of the UK’s net wealth, a new report from the Property Industry Alliance (PIA) reveals today.

This is an 11% increase on the 2014 value and has been driven by higher rents as well as the prices investors were willing to pay for a given rent.

PIA chair Bill Hughes said: “To put this in context, at £871 billion, commercial property’s value is the equivalent of 40% of the value of the UK stock market and almost half the value of UK government gilts.”

The report also reveals that:

  • Commercial property represents 13% of the built environment (total value of around £6.5 trillion)
  • The property industry contributed around £68 billion to the UK economy last year – 4.1% of the total UK economy
  • Direct and indirect exposures to commercial property account for £178 billion of UK insurance company and pension fund investments that support the nation’s savings
  • The commercial property industry directly employs almost one million people – one in every 35 jobs in the UK.

Mr Hughes said: “This report demonstrates the property sector’s fundamental importance to the UK’s economy in providing an attractive asset class for investors of all sizes and for the funds serving the nation’s savers and pensioners.

“However, we believe more could be done in partnership with the public sector to unlock the wider social, economic and environmental benefits of commercial property investment and development.

“We would like to see more connectivity in planning for property and infrastructure investment.  The synergies between, and benefits of, infrastructure and commercial property investment are clear, with undeniable links to UK housing, and we hope the Chancellor will signal a change of direction in his autumn statement to stimulate more activity in what has been an area of underinvestment over the past few decades. In a post-Brexit environment it is crucial that we build an economy that enables home grown and global companies to thrive and prosper in the UK, delivering economic and social value to all corners of the country as advocated by the Prime Minister.”

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L&G’s Bill Hughes becomes chairman of the Property Industry Alliance, as industry looks to strengthen its collective voice

Bill Hughes, Head of Legal & General Investment Management’s Real Assets platform (“LGIM Real Assets”), has been appointed Chairman of the Property Industry Alliance (“PIA”), as it looks to encourage further collaboration across the industry, ensuring that its contribution to the economy and society at large is fully understood and maximised.

Hughes takes over from Sir Robert Finch, who has chaired the PIA for the past five years and who in turn took over from Sir David Clementi.  Established in May 2006, the Property Industry Alliance (PIA) is formed of the eight leading UK property bodies who work together to give the commercial property sector a stronger collective voice on issues such as policy, research and best practice.

This appointment comes at a time when the role of the private sector in investing in the built environment has never been more important.  Following the progressive retrenchment of the banks in providing long term finance and the continuing indebtedness of the Government, the role of the private sector in partnering with the public sector is becoming ever more crucial to unlocking growth.

The PIA’s work will continue in a number of key areas, including the ‘Vision for real estate finance in the UK’, which is providing guidance to ensure the future real estate lending environment is more stable, and a range of  other important areas for the wider industry.  More work is being done on the topical issues of devolution of power and its impacts, as well as promoting the importance of the relationship between infrastructure and property as UK cities look to regenerate.

Bill Hughes, Chairman of the Property Industry Alliance and Head of LGIM Real Assets, said:  “The Property Industry Alliance plays an integral part in voicing the role that UK commercial property plays in the wider UK economy and its importance in improving the totality of the built environment. I am honoured to be asked to take on the role of Chairman and very much look forward to strengthening that voice.

“In this new role, I am particularly interested in emphasising the cross-sector synergies between real estate and investment in infrastructure in the UK, which is still significantly underplayed. Regeneration has been identified by government and industry alike as one of the key drivers of UK growth and a game-changer in retaining international economic competitiveness. Therefore, it is essential that the property industry joins together in embracing the connection between infrastructure and real estate so that efficient investments can be made into improving the UK built environment.”

Members of the PIA include the Association of Real Estate Funds (AREF), British Council for Offices (BCO), British Council of Shopping Centres (BCSC), British Property Federation (BPF), Commercial Real Estate Finance Council Europe (CREFC Europe), Investment Property Forum (IPF), Royal Institution of Chartered Surveyors (RICS) and the Urban Land Institute (ULI).

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Business rates an increasing burden on businesses compared to rent

Business rates are a growing burden on businesses as compared to the rent charged by UK landlords, according to a report released today by the Property Industry Alliance.

The Property Data Report 2015 has revealed that rental values, on the whole, have increased at a much slower rate than other business costs over the last 10 years, rising much more slowly than business rates and the rate of retail price inflation (3.1%).

The retail sector has seen the slowest growth of rental values at 0.2% per annum, compared to a 3.9% increase in business rate over the past decade. Rents in the office sector have seen an average increase of 1.8%, compared to a 3% business rates increase.

PIA PDR fig.8

Other findings in the report include the fact that overseas investors now own a quarter of invested UK commercial property, worth £113bn. This makes them the largest owners of UK commercial property that is invested for the second year in a row, having increased their presence in the market by 129% over the past decade.

In comparison, UK institutions now own £85bn commercial investment property, representing just under a fifth of total investment. This is an 8% decline since 2004.

The report shows that the total value of UK commercial property rose to £787bn in 2014, a 15% increase from the previous year. In 2014 the industry directly contributed about £63bn to the economy, representing 3.9% of Gross Value Added. Occupiers of commercial property paid over £20bn in business rates in 2014.

The sector employs nearly a million people – about one in every 35 jobs – and contributes almost £15bn in direct taxes to the Exchequer

Out of total UK commercial stock, the largest sector by value last year was retail, worth £340bn. This is followed by offices, worth £234bn, and industrial, worth £148bn. Other commercial property, including hotels and leisure, was valued at £65bn.

Sir Robert Finch, Chairman of the Property Industry Alliance, said: “Commercial property is an integral part of the UK’s economy contributing a comparable amount to the economy as the telecommunications and transport industries combined.  Commercial property provides the UK’s urban and commercial infrastructure and it is encouraging to see that the sector continues to grow and that it is attractive to both overseas and domestic investors.

“It is interesting to see that the value of business rates has significantly increased over the past decade, considerably outstripping the value of rental increases. This is particularly prevalent in the retail sector, where business rates have also grown by far more than the rise in sales turnover recorded in retail property.”

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