THE commercial property market is moving too quickly and is in danger of overheating if interest rates do not rise soon, according to an industry expert.
James Appleton-Metcalfe, managing director of property investment management company Citivale, said in the last 12 months prices have rocketed to 2005/6 levels at a rate which is unsustainable.
“The concern is that the market is getting overheated,” he said. “We have gone from year 2000 pricing to 2005/6 pricing in the last 12 months. That trajectory cannot continue. It needs to tail off.”
He added: “If the Bank of England’s base rate steps up next year, as people predict, that may well have the desired effect of cooling off the investment market.”
Leeds-based Citivale, which was launched in 2010 by Mr Appleton-Metcalfe, a former property fund manager, turns around struggling multi-let office and industrial assets, reducing void rates, building on rents and increasing property values.
The company, which reports to pension funds in London, currently has more than £100m of assets across 28 sites in its portfolio.
Clients include Kennedy Wilson, CBRE Investors and Black and Decker, which has opened a new research and development centre in Durham.
It broke through the £100m barrier with an appointment to manage the Pavilion Business Park, off the M621 in Leeds. The company manages 16 sites in Yorkshire.
Citivale is often brought in by property owners to manage assets that are struggling or need time spending on them at a local level.
Last June, it was appointed to Ringway Industrial Estate in Huddersfield, which was 50 per cent empty. In the last year it has reduced the void to 8.4 per cent following a refurbishment programme and marketing campaign. “We come in and sweat the asset and drive the estate forward and get back into income producing mode,” said Mr Appleton-Metcalfe.
The other side of the business is joint venture property investment - an area in which Mr Appleton-Metcalfe is keen to expand.
“We approach potential partners and tell them why it would be a good idea to buy a certain property with us and how we can make a good return,” he said.
He added: “In the investment market, yields have moved in a lot quicker than anyone anticipated. I still think there are opportunities out there but you need to work hard to uncover them and have business plans to extract the value.”
Citivale has three staff, two in Leeds and one in London, although it plans to take on one or two more people in Leeds over the coming months to cope with its increased workload.
Looking to his future aims for the company, Mr Appleton-Metcalfe said: “I want us to be best in class. I want to continue to build assets under management and the joint venture investments. I want to be the go-to partner for my clients in London and I want to build Citivale into a recognised brand not just within Yorkshire but also London.”
He added: “It’s one thing being able to say what you’re going to do but proving and demonstrating that you’ve done it is what really matters in my book.”