Not out of the woods yet, says Ronson

The great and good of the property world were at the Dorchester Hotel yesterday for the annual lunch hosted by Heron International, at which chief executive Gerald Ronson said he thought the market was about a third of the way through the current cycle. He expects the “sun to start shining again” in 2014/2015, with the clouds likely to linger longest in the UK regions. While there might be opportunities in London and in prime property this year, Mr. Ronson feels that in the rest of the market “a large degree of luck, bravery and Alka-Seltzer” will be required.

Mr. Ronson noted in his speech that growth was unlikely to stem from businesses expanding into new office buildings, but said the cycle of lease renewals was “appearing on the horizon” and that, with businesses seeking better-quality space, the limited supply on offer would create positive dynamics in the market. He also noted that rental levels in the City of London remained highly attractive.

Banks are still sitting on piles of distressed assets, he warned, and he noted that in previous such situations new entrants had come into the market in order to get the development wheels working again. “Also, the insurance companies are setting up property debt vehicles, so new entrants with new financial models, and joint ventures are likely to help the property industry start to be a proper business again,” he added.

Mr. Ronson cautioned that it should no longer be expected that the Government would not exercise break clauses on its properties, and said rents were more likely to fall than rise outside London. He also noted that retailers were likely to shrink in numbers – and said the planning system was partly to blame for this, adding that he felt that politicians had not done enough in the past to regenerate areas outside London.

“We are not out of the woods, in fact there is a lot going on in the woods, but we can now see the wood for the trees,” he concluded.

Heron yesterday announced practical completion of Heron Tower, its office building in Bishopsgate in the City of London. Four lettings have already been secured, including for the restaurant and sky bar on floors 38-40 and for the ground-floor restaurant. McDermott, Will & Emery, the US law firm, moved in yesterday to its offices on floors 8-9, while floors 17-19 have been pre-let to serviced offices company Landmark plc.