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Daily Archives: 24 Sep 2009

Savoy makeover adds to London hotels’ woes

Posted on 24 Sep 2009 | Comments Off

The Savoy, the 121-year-old London hotel that has hosted Elizabeth Taylor and Claude Monet, may add to strains on the city’s luxury guesthouses when it reopens next April following British hospitality’s most expensive renovation.

After last year’s collapse of Lehman Brothers Holdings Inc sparked a slump in business travel, the belated and overbudget completion of the Savoy’s makeover will dump 268 luxury rooms into a market suffering a dearth of bankers and corporate guests.

Even with the Savoy shut, revenue at London’s upscale hotels this year has declined the most since the Sars outbreak in 2003, according to STR Global, which tracks the industry.

‘Luxury properties are going to feel it when the Savoy opens,’ said STR Global analyst Konstanze Auernheimer on Tuesday. ‘In these market conditions, when it is already tough for everyone, it has been a blessing for rivals to have it out of action.’

Savoy manager Kiaran Macdonald said he’s counting on an economic recovery by the time the property reopens, almost a year later than planned.

The delays to restoration work meant the hotel missed the worst of the market’s decline, although the final cost to owner Prince Alwaleed bin Talal will be ‘a lot higher’ than £120 million (S$277 million), Mr Macdonald said, compared with an original budget of £100 million. Continue reading →

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Posted in Overseas Property

Tagged London Hotel, London Property, The Savoy, UK Property

Bargain hunting Down Under

Posted on 24 Sep 2009 | Comments Off

Investment activity in both the retail and industrial sectors has declined over the past 12 months

COMMERCIAL property values across Australia have dropped in the past 18 months in line with the global economy. Although the timing has varied, the decline has been observed across all capital cities and commercial asset types.

Melbourne and Sydney have fallen less than Brisbane and Perth, with the dichotomy in economic performance over the past three years amplifying the performance of commercial property.

As commercial property yields are affected by current rents and future rental growth, tenant demand and the volume of vacant supply are the major considerations when determining value. The availability and cost of debt and its relationship to the safe return of a 10-year government bond, provide the investment market an indication of the expected returns for a long-term commercial property investment.

Office markets have been among the hardest hit with values falling by 15 per cent to 25 per cent nationally. This has resulted in yields (rent/value) for prime quality assets increasing by around 100 basis points in most capitals from about 6 per cent to more than 7.5 per cent.

Melbourne and Sydney enjoyed relatively solid economic performance in the years leading up to the global financial crisis, which limited speculative activity and kept a lid on office floor space in the development pipeline. As a result, yields compressed to 5.5-6.5 per cent for prime assets as debt became increasingly accessible. Continue reading →