A newly compiled set of figures has shown a considerable increase in the number of property investment companies around the UK being entered into insolvency in recent quarters.
But rather than being taken as a negative indicator for Britain’s commercial real estate sector, the trend is in fact being attributed to an increase in property values and rental rates around the country and particularly in London.
According to the commercial law firm EMW, there were 346 instances of commercial property investment companies entering insolvency in the second quarter of 2015, which represents an 8 per cent increase as compared with the same period of the year before.
The figures also represent a continuation of a longer term trend with the number of insolvency cases in this context having more than doubled from 154 in the second quarter of 2011.
EMW explains its own findings by suggesting that banks are becoming more inclined to push for insolvency proceedings in situations where their property investment customers have been unable to make repayments on their debts and have effectively existed only as ‘zombie’ companies for the past several years.
Until relatively recently there has been little or no incentive for banks to push for insolvency proceedings in these cases but there is now much more optimism that value can be extracted from what were generally considered to be bad debts in the wake of the credit crunch and the financial crisis.
“Banks have been holding onto these sour loans since the credit crunch struck and are using this opportunity to recoup some of the value tied up in this bad debt,” explained Geoff Willis from EMW.
“Ironically, the rise in insolvencies is down to the improved property prices, rather than an indication the market is in trouble,” he continued.
“Higher occupancy levels and rental increases, especially on office investments in London and the South East has driven up prices.”
Continued growth in demand for office space in various parts of central London, including most notably the West End and the City of London, has been a key source of optimism and value increases with the UK’s commercial property sector in recent years.
Ironically, the rise in insolvencies is down to the improved property prices, rather than an indication the market is in trouble
Anthony established the banking and insolvency operations at Eddisons in 2000, a team which now operates across ten UK offices to provide close support to a panel of major banks.
Having personally taken over 3,000 appointments as a fixed charge receiver, Anthony is an expert in bank advisory work and is often called upon to provide expert witness testimony.
With an international real estate background gained at a Big Four accounting practice, Anthony has undertaken assignments across Europe and the USA.
As a board director of Eddisons, Anthony was central to driving the successful sale of the business to Begbies Traynor Group plc in 2014 and has since been actively identifying opportunities to further grow and develop the Eddisons business.