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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Rise in Distress Data

Emma Shipp, Head of Business Services and Julian Bishop Head of Real Estate London at Hewitsons, comment

The Real Estate and Property sectors have come top in recently revealed research from credit management firm, Red Flag, but it’s not a comfortable place to be. The report shows that in Q4 2018 the number of companies in ‘significant financial distress’ rose 15,000 to 481,000. Many predicted that High Street retail occupiers would see the highest rise but, in fact, it was the property sector that looked hardest hit.

Property firms in distress saw a 7% increase from Q3 and a 9% increase as compared with the same period last year.  To put that into context, that’s an extra 4,000 property businesses in difficulties as compared to Q4 2017.

Although these are nationwide figures, London has felt the chill wind this winter with property experts predicting a muted start to the year plus possible falls in London residential property prices of between 2% and 4% during 2019. These falls won’t be uniform across the whole of the capital with some spots likely to stay steady or even increase due to factors such as regeneration projects or the benefit of Crossrail.

Impact of insolvencies on London property
The figures from Red Flag are a double whammy for the property sector in London. The retail downturn may well be having a knock on effect with the administration of large retailers leaving sites empty and difficult to shift. In addition, there have been well documented attempts by those with financial muscle to re-negotiate rents – with varying degrees of success. The latest example comes from one bidder for HMV who is reported to have asked for a 6 month rent free period from landlords during failed discussion to buy the chain.  

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