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Despite fears that the UK economy is about to re-enter recession it seems that the London commercial property market remains a key destination for foreign investors looking to plough money into bricks and mortar.
According to Cushman & Wakefield, £6.3bn worth of deals were transacted in the City last year compared to £4.7bn in 2010 with at least 30% coming from overseas investors. St Martins Property, the Kuwaiti royal family’s sovereign wealth fund, are also following this strategy by selling off ‘non-core’ retail and industrial assets to free up cash to acquire more ‘trophy’, commercial assets in central London. Whether you agree with this strategy or not it all speaks positively of the London commercial property market and its desirability to foreign investors. This can only be a positive trend for the London economy and, alongside our strong Financial Services presence, will help maintain London as a global business powerhouse and reliable source of long-term return on investment.
In addition to the perception of London as a secure destination for foreign investors its geography will intrinsically contribute to push prices upwards as demand outstrips supply. With space at a premium in central London, development of any kind is limited and will inevitably lead to a bidding war. Furthermore, landmark developments like the Shard and the Walkie-Talkie require such a huge financial outlay that they are restricted to only the largest of companies – so it seems likely the clamour for high-quality real estate in London will continue to drive prices upwards, especially with all eyes on London in the Olympic year.
One note of caution, however, is the declining occupancy rates of London office blocks. According to James Young, Head of Cushman & Wakefield’s City office:
“Occupiers in general remain cautious and a number of decisions have been delayed. With the current economic uncertainty, 2012 will see take-up significantly below average. A number of planned schemes are likely to get pushed out and pre-letting is still a major requisite for most schemes. Prospects for demand look more positive looking further out, due to the volume of lease expiries beyond 2013.”
We may see occupancy rates in office blocks dip as businesses shy away from committing themselves in these uncertain times but I think we can continue to expect a lot of interest in London’s commercial property sector as investors take the long-term view over strong investments yields.
What do you think – I’d be keen to hear your thoughts?
Paul Phillips is the Senior Business & Support Services Consultant at Interim Partners.
Iran appears committed to its hegemonic aspirations within the gulf, flexing its muscles regionally on an almost daily basis (most recently with the large scale naval exercises around the Straits of Hormuz) and continuing its policy of developing itself into a credible nuclear player.
As the price of crude (over the long term) continues to rise on the basis of several factors – the eradication of reserves, continued global security threats and the political instability of some of the world’s largest exporters (GCC, Nigeria and North Africa for example) – we can add to this equation that the new major oil importers, notably China and India, are expanding their demand and the oil market will simply have to expand its production capacity.
Put simply, 66% of the world’s oil reserves reside in the Arabian region, and ultimately oil remains the world’s dominant source of energy and will continue to be for some time to come.
This indubitably promises to increase the world’s dependence on the Persian Gulf members of the Opec, especially Saudi Arabia and maintain upward pressure on price, in conjunction with the continued sabre-rattling emanating from Iran.
On this basis, what alternative strategies if any, should we be exploring to reduce our dependency on our future, free access to the region?
Jonathan Mooney is the Senior Energy & Utilities Consultant at Interim Partners.
PricewaterhouseCoopers is on track to receive a record 30,000 applications for its graduate entry scheme with just 1200 places available - the latest indicator of the strains in the British labour market. That’s an amazing twenty-five applications for every one place.
This figure is 50% higher than the 20,000 applications received for its 2011 intake. Ian Powell, Chairman and Senior Partner, notes however that one of the “real challenges” of applications on this scale is the fear of quality candidates slipping through the cracks. That means you’re eliminating a lot of people on paper.
I have some sympathy with this view. Compared to this time last year, the Interim Partners financial services practice has seen an increase of approximately 40% in new candidates wishing to join our community. This is largely due to investment projects being abandoned or postponed, redundancy programmes and generally more candidates opting for the interim lifestyle. What becomes increasingly important, therefore, is the quality of each individual’s ability to market him or herself effectively. There is a variety of tools on hand to help nowadays, from the obvious Linkedin/comprehensive CV to less commonly used techniques such as Twitter/websites/thought leadership pieces.
But for my money, the main route to success is to stick to the basics. Well- presented (grammatically correct!) communication, flexibility and polite persistence will ultimately pay off.
I would be interested to hear what your best marketing tips are…
Liz Sinclair is Account Director for Interim Partners.
The new year began precariously for UK Food & Drink manufacturing; as with the global economy many companies are teetering between signs of recovery and omens of collapse!
Being so risk adverse can create paralysis, but others are maintaining or even increasing profit through consolidation and cost management. This sheds light on a market that surely does not represent true sustainable growth. Now more than ever is the time for fresh ideas, invention and innovation - we must tackle austerity with audacious ideas that represent real business opportunities and tackle fundamental problems in the market!
Tesco alluded to this with the announcement on Friday that festive cheer ran out, with results taking a tumble following their lacklustre review of Christmas trade. Chief Executive Philip Clarke admitted Tesco was “disappointed” with its domestic performance over the seasonal period:
“There is much more we can do to further improve our shopping trip for customers and we are determined to move faster.”
For most people the new year is a time for reflection, prediction and action and the same is true of major multiples such as Tesco. The recession has had an impact on UK consumers’ shopping budget which – now seriously pinched – has become more discerning. Traditionally the retailer response has been to pass on the pain and squeeze manufacturers’ margins.
However, is Phillip Clarke’s statement a nod to change in 2012? Will manufacturers this year have a chance to change the balance of power?
If so, how ?
In the last few year retailers – by squeezing margins – have forced manufacturers to focus on good cost management and supply chain efficiencies to recover bottom line margin. Market consolidation was another approach – buying up market share and creating stronger leverage with retailers.
However, does this represent true market growth in the same way as organic growth or innovation or new product launches? Perhaps the retailers’ continuous downward pressure has sent manufacturers into a New Product Development black hole or has it had the opposite effect?
I believe the winners of 2012 will be those businesses that can invent, innovate and launch effectively. As we can see with Philip Clarke’s statement retailers want to embrace change and improve the shopper trip experience, so not only is it about new product – the focus will also be on innovative in-store activation!
The key trends of 2011 will continue in 2012, with three areas of business activity in Food & Drink:
1. Consolidation will continue as businesses build market share and power to battle the retailers on price and distribution.
2. Cost Management – on-going review of cost and efficiencies to recover margin erosion. Looking at the total value chain as a response to increasing raw material costs and decreasing margins with the retailers. Businesses will also be looking at how they can re-engineer processes/product to innovate in the market, so a combination of cost management and NPD will support a more strategic approach and joint planning with the retailer.
3. Innovation – my call to action for 2012. We must have fresh ideas, new ways of working and new products if, as a market, we are going to truly grow.
So how as an industry can we bend the boundaries, change the way we work and launch new and exciting products, gain power back from the retailers and connect with the consumers????
Manufacturers need to be more daring and as they say; ‘out of adversity comes opportunity’ !!
Jo Sands is Head of Food & Drink at Interim Partners
Yet again we approach the bonus season for Bankers – not much seems to have changed and yes, we are still talking about it!
The public in the main are still angry about their pay, shareholders undoubtedly have strong views too but are powerless to influence change and block large pay outs to bosses.
Mr Cameron says he is determined to end the “merry-go-round” of super-rich bosses rubber-stamping each other’s enormous salaries and being rewarded for failure – even if that means legislation.
Research from the Institute for Public Policy Research (IPPR) suggests chief executives in 87 of the FTSE 100 companies took home an average of £5.1m in basic pay, bonuses, share incentives and pension contributions in 2010-11.
This represents a year-on-year increase of 33%, while the average increase in company value was 24% according to the think tank.
Does this “make your blood boil” as Mr Cameron says?
This maybe a solo position but I am not against a bonus culture, providing it is linked to positive performance and within a scheme that contains the necessary checks and balances to monitor this. Isn’t this how all businesses run?
Clearly not all banks are the same and we should not tarnish them all with the same brush ! However, it would be a very sad indication of an overall banking culture if legislation was needed to control a fair bonus culture.
What are your thoughts on the matter?
Angela Hickmore is a Director at Interim Partners.
I hope that everyone had an excellent Christmas and New Year. 2011 was not without its challenges but the financial services practice of Interim Partners had another strong performance with growth over 30% for the second year running. Given the level of change within the financial sector I expect 2012 to be equally busy with cost reduction exercises, regulatory reform and integration programmes widely present in the market.
Now that the festivities are over and normal service has resumed I am fully focused on what needs to be achieved in 2012 and how to go about it. At the risk of sounding strange, I must confess to thoroughly enjoying writing business plans, it’s a great chance to step back, lift up the drains and think hard about what works and what doesn’t. Something new that I will be doing this year is working towards achieving the Chartered Director qualification with the Institute of Directors – its been a long time since I went back to school but am looking forward to sharpening up on subjects such as finance, strategy, marketing and corporate governance.
I would like to ask those within the Interim Partners network: what are your objectives for the year and what are you doing that is new for 2012?
Andrew McIntee is Director of Financial Services for Interim Partners.
I hope all those in our interim community enjoyed their holidays over the festive period. Commiserations to those that either had to work or burnt the turkey.
I am really keen to hear your thoughts on how this year is going to pan out – from a UK economy point of view as well as from your own personal views on the interim market.
I am certainly no Mystic Meg and thankfully no Russell Grant (I imagine myself to be a better dancer) but have a couple of predictions of my own. On the UK economy: it’s going to get a bit worse but not by much more (famous last words). My sense is that there is definitely a chance of a double dip earlier in the year but businesses and individuals are better placed to deal with it. All sense of denial has gone and many are already in the brace position. Yes there is going to be more carnage on the high street and economic news will continue to be bleak but I don’t think we are in for a big surprise. It’s not going to feel like the beginning of 2009 when there was a sense of free fall – no understanding of where the bottom was.
So more of the same again? Well not quite – I think UK businesses are a little more resilient than we think. Post Olympics we are going to be in a much better place. The feel good factor of the games and the potential economic benefit of the parties and barbecues will hopefully have a big boost to consumer and business confidence. By the end of the year I really hope the sense is that the economy has turned and we can look forward to small, steady growth? Sorry – not even a mention of the Eurozone! Are my ideas too optimistic or simplistic?
And the market for interims? It will remain very competitive – but there is still a good market for excellent candidates with a clear proposition. My belief is that generalists will continue to find life hard. Clients don’t seem to want or have the luxury for a jack of all trades who can turn their skills to a number of issues. They continue to search for specialists – those who have unique and insightful experience into their particular problem. They prefer them to have that experience, or full understanding, of their sector. They understand that they have a good chance of finding specialist skills and they lack the desire to compromise.
We as a business do far more in the private than public sector and our outlook for the year is quietly confident – we even plan to do better in the public sector. Are you – in the wider interim community – also sensing slightly sunnier times?
I would like to take this opportunity to wish our clients and interims a happy and prosperous new year.
Doug Baird is the Managing Director of Interim Partners.
Happy new year and I hope everyone has had an enjoyable holiday period. Now that noses are truly back to grindstones I am keen to canvas opinion, whether it be tongue in cheek or more serious, as to what will happen this year in the TMT sector.
My view is that within the media world there will be continued cost pressures and perhaps a heightened level of merger and acquisition (M&A) activity. The push to digital will continue at an increased pace.
Within the telco world I see that the Middle and Far East will have more activity, particularly around launching new services to existing and new markets. Infrastructure vendors will continue to feel the squeeze but the savvy mobile operators will see increased revenues from a diversified portfolio. Perhaps the trend I saw in Q4 for MVNA/E/O start ups will continue.
And within technology I see several household names disappearing, M&A continuing for the big players and hopefully an iPad3!
I welcome your thoughts and wish you all a healthy and prosperous year.
Steve Blake is Head of TMT for Interim Partners.
There has been lots of talk this month about the perilous state of the economy and its outlook for next year, a similar tale really from the rest of this year. I was interested by the comments of a couple of businessmen for differing reasons this last week. Firstly from a leading retailer who said that flat is the new growth and holding position over the next couple of years will compare to the high growth model of old that had the investment community buzzing. Then from one of the best known PE house owners who comments on the need for the industry to look for “long-termism” for future investments, and that the existing model is just no longer viable.
These are just opinions of course, but if they both hold true then how are investments going to be valued going forward, will there be an even greater stagnation in the deal market as perceived values from either side of the fence differ drastically as we all dispute what the bottom of the market really looks like.
I’m personally seeing quite an interesting marketplace at the moment where my clients are looking for long term operational sense in some of their portfolio businesses and short term cash grabs in others. We can help in both cases as well as assisting in their more traditional needs of executive gap management.
My question for today relates to the current position of the market that needs a good kick start. Are perceived investment valuations changing extensively at the moment due to economic forecasts (flat being the new growth) and as a result what activity will we see in the non distressed marketplace? Sadly I think I know the answer but would be really interested to hear your thoughts.
Simon Gough is a Director and Head of Private Equity.
It is a well-known fact that war brings on significant advances in technology (as well as medicine, social change etc.) and whilst not advocating the need for more wars there have been some interesting correlations between the two. WW2 brought the computer and microwave, the Cold War brought in the Internet and the War on Terror has brought us the Xbox Kinect. This full motion sensor device uses battlefield technology to deliver ground breaking user interaction with the games console. Okay a slightly tongue in cheek comment but my point is that the connection between advances in military technology (which benefits from massive R&D investment) and in consumer technology are almost on a par. Recall how the US GPS system was never available for consumer use until relatively recently and now everything has a GPS chip in it (including my dog). When I see images of pilotless drones in Afghanistan being flown by “pilots” in Colorado using what appears to be the Logitech Wingman 3 flight controller, I question whether it is now consumer technology leading the way and if so where to next?
Steve Blake is Head of TMT at Interim Partners.
