The Duke of Westminster's property group, Grosvenor, warned yesterday that Britain's commercial property market was unlikely to recover this year and that real estate returns were likely to slow globally.
The privately owned company owns or manages property around the world, including the estate of the Duke of Westminster – once Britain's richest person and still among the country's most wealthy individuals. Grosvenor reported total returns, combining income and capital growth, down from 15.5 per cent to 14.4 per cent for 2007. Profits rose 3 per cent to a record £524m as the Grosvenor's international business helped offset the slump in Britain. Jeremy Newsum, the chief executive of the £13bn investment firm, said that the UK's ailing commercial property market was unlikely to hit bottom in 2008.
"Our belief is it will be a bit more drawn out than many would hope, and just saying it will get better in six months is wishful thinking, rather than based on any evidence," Mr Newsum told Reuters. He predicted that rents will be threatened by the slowing economy and job losses in the financial sector.
Commercial property values in the UK have fallen almost 16 per cent since they peaked last summer before the credit crunch took hold. The slump has been worse than in any other commercial property market, but no market will be immune from lower returns as capital appreciation slows, according to Grosvenor.
"International markets are more tied together than they used to be, and our comment about expecting lower returns does not except any of our markets," Mr Newsum said.
Grosvenor's roots go back to 1677, when Sir Thomas Grosvenor married into 500 acres of land north of the River Thames, land that the family developed into Mayfair in the 18th century. All the shares in Grosvenor are owned by trusts that benefit members of the Grosvenor family, which is headed by the Duke of Westminster.
The company has diversified into building shopping centres and other developments around the UK and in Ireland. It also has investments in Continental Europe, Asia and North America.
Mr Newsum, who steps down in June after 19 years leading Grosvenor, said that the company was not planning to add to its portfolio. Deals are tempting but the company will probably sit this year out, he said.