Tech crisis fuels property slump

Lakeside shopping centre: part of Liberty International's £4bn portfolio

Property gurus have blamed the global tech and telecoms crisis for a slump in office demand and in overseas investment in one of the UK sector's key heartlands.

Consultancy Healey & Baker warned that demand for property in the Thames Valley, home to tech giants including Oracle, Siemens and ICL, plunged by 30% in the first three months of the year.

The consultancy estimates that three quarters of demand for office space in the region comes from telecoms, media and technology firms.

The data reflects a warning from the South East Economic Development Agency that the number of overseas businesses setting up in the area fell by 40% over the quarter.

And the slide, while led by tech firms, is being increasingly reflected in the broader commercial property sector, shopping centre giant Liberty International warned.

"The current slowdown in South East and Central London office markets does appear to be spreading beyond the initial high profile retrenchment of mainly US telecom and technology firms," said chairman Donald Gordon.

"The infectious nature of negative sentiment, coupled with an uncertain business outlook, has resulted in some hiatus in potential tenant decision making."

Office vacancies were "now likely to rise", while retailers had proved "selective and cautious" over taking on new floorspace despite buoyant spending by UK consumers.

'Slower conditions'

The warnings came in a results statement on Wednesday showing that pre-tax profits at Liberty, whose portfolio includes the Lakeside Complex in Thurrock and Tyneside's MetroCentre, fell by nearly one half to £41m in the first half of the year.

And mid-ranking property firm Brixton, revealing pre-tax profits down 2% to £19.9m over the six months, also warned of "slower market conditions", with a "marked slowing of activity" in the office investment market.

Annual rental growth at Brixton's key Heathrow and Park Royal holdings over the next four years has been revised down to 7% and 6% respectively, the company says.

But Brixton, although based in the south east of England, said its limited exposure to clients in the technology sector would shield it from the worst effects of the sector shake-out.

Although the company numbers tech giants such as Cable & Wireless, Hutchison and Vodafone among leading clients, much of the property rented is for non-office use.

In the City, Brixton shares stood 1p higher at 228.5p in lunchtime trade.

Shares in Liberty International were up 10p at 513.5p.

Buyout opportunities

Analysts blamed much of Liberty's profits slump on a share buyback programme last year, rather than on underlying weakness in the business.

And the firm, which claims 180 million shopping visits a year to its retail centres, said the continuing strength in High Street spending would support earnings from its £4bn portfolio.

"Our business remains an exceptionally resilient one," Mr Gordon said.

He warned, however, that sector minnows faced problems exploiting the maturing shopping centre market.

"We anticipate further consolidation opportunities as smaller players find it progressively more difficult to sustain their involvement in this increasingly challenging and specialist market," he said.