Dear Sir/Madam,
Yield to temptation - (Tips on property investment)
Office tenants are now being asked to pay up to £65 per year to have a waste paper bin if the current rent per square foot at the Gherkin (above) is agreed! This makes it the most  expensive office in the city and the UK easily outstripping earlier lettings which only 18 months ago were £43.50 p.s.f.
No doubt this is one of the reasons why Swiss Re, the owners have decided to sell the freehold for as much as £600 million which reflects a 4.5% yield. In other words using these figures it will take the buyer just over 22 years to pay for this investment!
Investors will be tempted to plough money into direct commercial property investment perhaps as a pension pool. Even for much smaller investments generally sold at auction according recently to Andrews & Robertson “rising interest rates have made absolutely no difference to buying activity in the room”.
Key issues for those who are tempted are:
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The sector of the property should be carefully considered.
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There should be a prospect of rental and/or capital growth.
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The tenant should be of good financial standing with a guarantor if not.
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The lease length should be reasonably long
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The tenant should be responsible for all repairs and insurance
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Other clauses in the lease should be conducive to good property investment.
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There should be no changes in the locality/demand & supply & competition that would materially affect the investment.
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Unless there is a particular reason to hold on, the investment should be sold whilst it is still attractive to a potential purchaser – as with the Gherkin.
IFA’s will be conscious of the need for care and experience in placing clients funds. As chartered valuation surveyors are ideally placed to source, negotiate and deal with any subsequent rent reviews or lease renewals.
See our page http://www.rdn.co.uk/lease.htm
This is part of a regular series of topical articles provided exclusively by RDN Chartered Surveyors. If you would like any further information or add your comments please reply to this e mail or contact Roger Nelson on 0800 902 0466.
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