Study Group: Commercial Real Estate Experts (UK)

GLG News^SM Analyses by this Study Group's Leading Experts(?)

The UK Commercial Property Market - A temporary blip or something more significant?

January 2, 2008

Analysis by:Nigel Marks, Director,

Analysis of:Optimists stand tall as tremors hit office market | business.timesonline.co.uk

James Rossiter's article suggests that there is a difference between the current fall in UK office and retail property prices and that which occurred about 15 years ago when it took several years for the market to recover. He implies that the current downturn is likely to be shortlived and that the commercial office and retail property market will bounce back fairly quickly, particularly since the prevailing conditions are very different. His article is very relevant as the bouyancy of the UK property sector is inextricably linked to the health of the UK economy generally.

UK Homebuilding - Can the Government's proposals satisfy the housing need?

July 26, 2007

Analysis by:Nigel Marks, Director,

Analysis of:The Housing Green Paper | www.communities.gov.uk

The UK Government has announced proposals to deliver 3 million new homes by 2020 to keep up with demand, particularly for affordable, sustainable homes. To enable this to happen, land must be made more readily available and the complex planning process that exists, must be simplified. To achieve these significantly increased housing numbers, delivery mechanisms must be redefined. The public sector's role must be redefined and private developers must see some commercial advantage that may or may not accrue to them. The Government's proposals are designed to stimulate discussion and the consultation period ends in October, this year.

Consolidation in the UK Homebuilding Sector - Is this the finale?

April 13, 2007

Analysis by:Nigel Marks, Director,

Analysis of:Taylor, Wimpey to Merge, Forming Top UK Homebuilder | www.bloomberg.com

If successful, the proposed merger between Taylor Woodrow and Wimpey will create the UK's largest housebuilder, delivering approximately 31,000 units a year. This will consist of 22,000 in the UK and 9,000 in the US, where both companies have long enjoyed a presence. Even within the UK, 22,000 units a year exceeds the number of homes completed by Britain's current largest housebuilders, Barratt (19,800) and Persimmon (16,700).

Both Taylor Woodrow and Wimpey have similar structures and operations. Both are less profitable than many of their peers and even when combined, their joint UK landbank will amount to a relatively modest 92,000 plots, less than both Barratt and Persimmon, each with 103,550 and 94,655 respectively.

Logistically, a UK homebuilder will find it structurally and managerially difficult to deliver over 30,000 units a year over a wide geographical area. This is particularly given the land aquisition, planning and building performance constraints increasingly faced by housing developers in the UK. Even in the US, where the market is larger, the land and planning difficulties are smaller and the building methods are different, there are only three companies that have delivered in excess of 30,000 units a year.

Persimmon or others may intervene with a bid for Taylor Woodrow which may provide shareholders with a greater return. However, if the Taylor Wimpey merger is concluded, it would create a huge gap between the UK's largest housebuilders (Taylor Wimpey, Barratt and Persimmon) and the rest, leaving smaller quoted developers such as Redrow, Bellway and Bovis Homes more vulnerable to takeover, as consolidation within the sector is likely to continue.

 

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