Banks urged to do more to help recovery

THE lack of bank lending is continuing to stifle development opportunities in Yorkshire as developers struggle to access finance, according to a senior property figure.

Guy Gilfillan, head of property agent Lambert Smith Hampton Yorkshire, said even if banks marginally relax their lending criteria, it could kickstart the market into a quick recovery.

Speaking at a seminar, entitled The State of Play, Property Another Year On, in Leeds, Mr Gilfillan said: "I am optimistic about the future but the lack of finance is still causing a real problem. If banks relented by about five per cent, it would make a huge difference."

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He added: "When the market turns, it will improve much more quickly than commentators expect."

But Sylvia Bowden, property specialist for the east region at Yorkshire Bank, insisted it was the lack of occupier demand holding up transactional activity in the commercial property market rather than a lack of finance.

"I don't think the activity will increase until we have more confidence about growth in the economy and a lot of that will depend on a growth in exports and how our manufacturing sector performs," she said.

"There is certainly finance available for pre-let new developments. I don't think that developers will have a lot of confidence to start building at the moment without pre-lets in place but that is certainly very fundable."

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She added that there was an increasing supply of finance for developments and investment properties and interest rates were "very supportive" of businesses.

However, she warned that banks were not in a position to take equity risk and would only lend on very sensible terms.

"You need to think much more carefully about how you present your lending cases," she said to the audience. "You need to understand what is likely to get funding, and when you are looking at transactions in the market place, you need to understand what sort of leverage is likely to be available in order to calculate your return on equity.

"You also need to understand the wider relationships the banks are now looking for and communicate with your banks the strategy for your long-term business relationship going forward."

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There have been a number of successful developments and investments in the region in 2010, including work restarting on the Trinity Leeds retail scheme, large industrial deals by Debenhams, ASOS, Asda, Poundworld and Next, and the purchase of office developments, including Gateway Plaza, in Barnsley, by Barnsley Council, and No 1 Whitehall Riverside, in Leeds, by NFU Mutual.

Mr Gilfillan said future opportunities would come from the retail, healthcare, education and the public sector offloading parts of its property portfolio.

"The game isn't over yet. We feel that in a number of areas the market is bumping along the bottom and there are areas where growth opportunities are happening or about to begin," he said.

Although the office sector has been hit the hardest, Mr Gilfillan estimated there could be 850,000 sq ft of leasing opportunities from existing tenants before 2015 as they decide whether to move into new premises.

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Mr Gilfillan also pointed to a dwindling supply of large distribution sheds in Yorkshire, estimating there was about two years worth of supply currently on the market.

The seminar, at Thorpe Park Hotel, in Leeds, also featured presentations from PKF accountants, Irwin Mitchell and Leeds City Council.

'Rent-to-buy' plan for businesses

Wilton Developments has launched a new scheme for businesses struggling to afford their own property.

The company has created a 'Rent-to-Buy' scheme at its Ebor Court development, in Doncaster, which enables potential buyers to let a new-build office suite for up to 15 years, with each monthly rental payment offset against the total value of the property, giving the occupier the option to buy the property for 1 at the end of the lease.

James Scott, development manager, said: "With bank finance still difficult to come by, most businesses are unable to bear the up-front costs associated with purchasing their own premises."