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London, 9th March 2009 - A wealth of cash-rich buyers are entering the property auction market to snap up retail assets from sellers who need to raise money to pay off debt or to strengthen balance sheets at bottom-of-the-cycle prices according to Jones Lang LaSalle’s report Implosion of wealth or an explosion of opportunity?. The latest in a series of papers, the report examines the private investor in the commercial property market from the dynamic and transparent perspective of the auction room.Richard Auterac, Director and Auctioneer at Jones Lang LaSalle, commented: “The auction room provides the most transparent, liquid and up-to-date marketplace, and retail values have adjusted sharply in recent months. Some experienced investors have already begun looking for opportunities, placing themselves ahead of the game in acquiring assets at cheap if not rock bottom prices. The current weakness in Sterling is also providing increasing opportunities and incentives for non-UK investors. These cash-rich property entrepreneurs have taken the place of debt-driven buyers and will be able to secure some suitably-priced property stock over the next 12 months.”Key findings of the report include:1) In general retail prices will drop until 2010, by up to 50% in total. However, the majority of this fall has already occurred.2) Retail yields in general will bottom out later this year at 8%+, compared to a 5.6% average at the start of 2008.Retail rents will fall until 2011 by around 20%.3) From 2011 total returns will recover rapidly and help retail to regain some of the ground lost since 2007.4) A plentiful supply of debt will not be available when the best buying opportunities are on offer.5) Cash buyers will be selective and only buy properties which have been thoroughly researched or are known already.6) Good quality assets which would otherwise be held will have to be sold by owners under pressure to realise cash.7) Cash returns are very low at the moment and income returns from property are very much higher. Finance costs linked to base rates or London Interbank Offered Rate (LIBOR) have fallen rapidly and this is a major attraction to property investors at the current time because it allows existing investments to throw off surplus cash to pay down debt or to reward equity. Longevity of income flow however may be threatened by tenant failure of declining rental values.8) Second tier towns (such as Maidstone, Chester and Taunton) have higher proportions of retailers at high-financial risk, but post 2010 there will be a swift consumer recovery resulting in a marked increase in retailer demand for space resulting in the potential for higher returns to those investing during the downturn.
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