Thursday, May 14, 2009

More Confusion (at least for me) from Great Britian

Another story, this one from Bloomberg about London's real estate market, specifically commercial real estate.

It’s another story in the City of London, where office rents in the U.K.’s main financial district are falling to 1991 levels as job losses and a mistimed building boom depress prices.


Rents will drop to 40 pounds per square foot by the end of this year, the same as 1991 when Canary Wharf got its first tenants, analysts at London-based King Sturge International LLP estimate. Prices declined to 46.50 pounds per square foot in the City during the first quarter from a high of 65 pounds in mid- 2007. Rents fell to as low as 30 pounds two years after Canary Wharf opened.

How can this be while you have consumer spending surging and residential real estate prices stabilizing? As some are predicting, how can Great Britain be out of a recession this summer? No country has more greatly befuddled me than this one.

The article mentions several examples of much more supply coming on line. This is just one.

The 445,000-square-foot Walbrook development from Minerva Plc, due to be completed this year, has no tenants. Minerva is also constructing a 560,000-square-foot office building called St. Botolphs, to be finished next year. About 84,000 square feet are leased, according to the London-based company.

At the same time, the UK Guardian is reporting big job cuts from BT (a telecommunications company).

BT is axing 15,000 jobs over the coming year, roughly 10% of its workforce, as it tries to save costs after announcing a dramatic plunge into the red and warning that revenues will drop this year.

All the same time, KBC shares were suspended in Belgium as the bank gets ready for a possible third round of bailouts. From the Guardian.

The Belgian authorities are expected to announce a third bailout for the banking and insurance group KBC tomorrow amid speculation that it has lost up to €4bn (£3.6bn) on complex financial instruments.

Anxiety about the deepening woes at KBC unsettled stockmarkets today and served as a reminder that some banks are still fragile despite improving confidence in the financial system.

Shares in KBC were suspended after "wild rumours" circulated about its losses on collateralised debt obligations (CDOs), the complex financial instruments at the heart of the credit crunch. The Belgian group said it did not want to make a statement before its first-quarter results are released tomorrow morning.

And yet - everything is somehow fine across the pond. It doesn't add up.

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