Crunch counselling from a property pro
As the UK property market continues to fall foul of the credit crunch, one of the industry’s most influential agents has some advice: brace yourself, be patient — and take a longer holiday.
Mark Shipman, 46, is a founding partner of Michael Elliott property investment consultants, where he acts for a number of high-profile clients including property entrepreneur Elliott Bernerd and billionaire diamond-dealer Lawrence Graff. The West End-based company has transacted over £5 billion-worth of commercial property investments over the past two years, but Mr Shipman acknowledges the industry now is a different place.
“We are in something of a hiatus period,” Mr Shipman, a former vice-president of Spurs football club, tells JC Business. “Those with money are choosing to bide their time hoping that prices will keep falling, and those looking to dispose of their holdings are too aggressive on pricing. This, coupled with the reluctance or inability of the banks to lend, means that turnover has dropped dramatically. People will take longer holidays this year with a chance to reflect, form an opinion and recharge the batteries.”
He says the mood among his peers is fairly gloomy. “We could all see the arrival of the downturn last summer, but I don’t believe that many people knew the true effect of the subprime mortgage debacle. There are now very real concerns about job losses caused by the lack of liquidity and failing confidence.
“My advice to my peers is brace yourselves and to be patient with the market,” adds Mr Shipman.
He has experienced two previous downturns, and maintains that today’s market is nowhere near as bad. “Without doubt there is more available equity in the marketplace than bank debt, which is unusual. The weight of money from super-wealthy groups such as the Middle East Sovereign funds, American institutions and German funds is still vast, seeking to invest in prime, large Central London opportunities.”
One Israeli client, Gil Levy, is planning a 1.5 million sq ft development in Central London.
Mr Shipman, ranked by Property Week as one of the UK’s top investment agents, has advised on Burlington Arcade — a collection of freehold shops off Bond Street, which, acquired for £65m, is now worth more than £120m. He also bought Centre Point for £90m; it is now valued at more than £300m.
He believes there is still demand for such trophy assets. “Better-quality opportunities should become available where vendors could be forced to sell. So when one of the best-located properties in London becomes available, we act for a number of clients who would jump at the opportunity to acquire a unique trophy asset.”
He adds: “Investors are buying property for wealth-preservation purposes, buying the best property and location to be locked away forever.
“Some investors take the view that as long as the market is off the peak, they don’t want to miss quality buying opportunities now. However, the majority are watching and waiting.”
The bargains, he says, are not out there yet, as he expects land values to slip further. “The first people to suffer are definitely developers.” He acknowledges that younger agents, who have not experienced a downturn or had to work hard for their bonuses, are also going to suffer.
Mr Shipman, who co-founded Michael Elliott in 1985, began his investment career in 1981. “Part of my education was to walk to appointments — no taxis — looking up at buildings with an eye to recognise development potential. In those days, we all wanted to progress as quickly as possible, often working a long six-day week on a basic weekly salary of £40 and a bit of commission thrown in.”
What does the future hold? “The economy will get stronger — who knows, it could be two or three years. What is interesting about this market is that the whole world is not suffering as one. The substantial wealth in the Far East and Middle East is proving that money today is very, very global. Potential investors can visit an opportunity within hours of notification by simply boarding a plane.”
A father-of-three, he founded Rays of Sunshine, a charity which he set up five years ago to grant wishes to terminally ill children. He supports Jewish Care and chairs their Minerva business lunch. He lives in St John’s Wood and is a member of Upper Berkeley Street Synagogue.