One of many UK’s largest non-public landlords has mentioned it’s looking out for worldwide offers to diversify its portfolio however doesn’t anticipate a “bonanza” from sharp falls in industrial property values.
Grosvenor, the Duke of Westminster’s property group, owns swaths of central London in Mayfair and Belgravia. Chief govt Mark Preston mentioned that falling property values and problem acquiring debt in some components of the US actual property market will create alternatives for deep-pocketed traders like Grosvenor.
“We don’t suppose there’s a market huge bonanza. There are attention-grabbing pockets of alternatives . . . notably from components of the market the place the debt market is beginning to shut up,” he mentioned. “As a long-term investor with affected person capital, we’re in a really perfect place to capitalise.”
As a part of efforts to diversify, Grosvenor is aiming to double its third-party investments — backing belongings run by different property administration and growth firms — to £1.5bn over 5 years.
“We have already got a really important portfolio in residential in London. The oblique enterprise is concentrated on diversifying our publicity,” mentioned Preston. Grosvenor Property’s holdings have been valued at £9bn on the finish of 2022, roughly flat from the 12 months earlier than.
The corporate invested £300mn in third-party offers final 12 months, taking its complete oblique investments to just about £600mn in areas from Australia to Brazil.
The group, which started creating fields and marshland into the district now generally known as Mayfair within the 1720s, has 36 per cent of its property portfolio in places of work and roughly 1 / 4 in every of retail and residential, together with holdings in North America. It’s seeking to improve its publicity to different sectors together with logistics and scholar housing, and to develop in Europe and Asia.
Rising rates of interest have prompted nervousness about industrial property values, making lenders extra cautious concerning the market. Excessive workplace emptiness charges and the collapse of Silicon Valley Financial institution have added to these worries within the US market.
Lisa Attenborough, head of debt advisory at property company Knight Frank, mentioned the sharp rise in debt prices has meant that for a lot of offers taking over debt is now a drag on monetary returns, which creates a “clearer enjoying subject” for traders who can shell out giant quantities of money and rely much less on debt.
“The US is the place the debt market has actually tightened,” she mentioned, whereas in Europe and the UK “the debt is unquestionably there, however is it reasonably priced?”
The early levels of the pandemic inflicted heavy losses on Grosvenor as property values and lease assortment dropped, notably in its British and Irish enterprise.
Grosvenor’s city property enterprise recorded pre-tax earnings of £110mn in 2022, down from £437mn a 12 months earlier than. The corporate mentioned the drop was principally attributable to a number of giant one-off property gross sales that boosted the leads to 2021. Pre-tax earnings in its UK property unit, adjusted to exclude valuation actions, elevated 6 per cent to £38mn.
The corporate mentioned it had set a brand new goal to scale back its international direct and oblique carbon emissions in keeping with limiting international warming to 1.5 °C. The UK property enterprise, which has already dedicated to achieve internet zero by 2040, has diminished its carbon emissions by 24 per cent over two years, it added.