Will “mind boggling amounts of money” spark speculative development?

The lead article in this week’s Property Week magazine in the Analysis by the editor carried the following opening paragraph:-

“The amount of money targeting the UK and Europe at the moment is simply mind boggling”.

The article goes on to quote some of the Funds who made announcements recently at MIPIM. Starwoods $5billion fund targeting European assets; Pimco’s $7billion fund and Lone Stars’s next fund project after a recent $5billion portfolio acquisition.

With funds in the US raising these huge amounts of money all looking for a home, and that home being in European real estate, this will help drive property investment markets.

Whilst the investment markets are seeing increased activity there is not a lot of stock coming to the market and that picture looks unlikely to change.  With interest rates continuing at record low levels there is no incentive for the owners of well let investment stock to start trading.

This brings me to the much debated issue of speculative development funding.  If there is little or no stock to buy surely it can’t be long before money finds its way to the developers?

Prologis have started to build speculatively and it badly needs more to follow.  We expect the pace of “spec build” to gather.  If the economic recovery is to sustain itself this flow of speculative build will have to gain real momentum.

And this is before we get onto the subject of the complete absence of new of high quality stock to suit occupiers’ requirements – but that’s another topic altogether!

For help or advice on speculative schemes contact on of the agency team at Harris Lamb.