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2011 could be good time for property purchase

Uncertainty in the automotive sector and the economic climate could fuel prospects for good property acquisition opportunities next year.

Tom Rigg, GVA Grimley partner roadside and automotive, said: “Now is a good time to buy if you are one of the few businesses that has access to significant cash reserves. 

“Sellers are more inclined to agree to an offer if you can demonstrate cash reserves with limited reliance on bank funding.”

Rigg said strong businesses are continuing to investigate property purchases. 

Prior to 2008 takeover targets were reluctant to sell off the back of strong sales and cheap credit. He said: “Now more business owners are taking stock and looking at opportunities to exit the trade in tandem with manufacturers supporting takeovers of weak businesses in key territories by established and profit-making dealer groups or sponsored dealers.

“Acquisitive dealers should be aware of the underlying reasons to sell a property in order to capitalise upon the possibility of a distressed sale.”

As for the property market next year, Rigg said: “Economic growth is likely to slow and remain below trend over the next year or so, due to the Government’s proposed large tax increases and spending cuts, but a further recessionary period is unlikely.

“Property occupier demand will remain relatively subdued for some time, rental growth will increase, but will remain below inflation in most areas for a number of years.”

Is this a good time to sell if you are looking to get out of the motor trade? Below we spell out GVA Grimley’s reasons for and against.

The pros and cons of selling

For:

  •  Automotive market remains challenging
  • Prospect of a double-dip recession. Potential (albeit limited) for values to diminish.
  • Strong investor demand for sale and leaseback
  • properties let to strong covenants with index linked rental increases (a sale and leaseback allows the
  • business to trade, but as a tenant rather than
  • owner occupier).

Against:
 

  • Underlying land values somewhat depressed (except in prime areas).
  • Perception amongst buyers that a sale has been “forced” owing to trading difficulties.
  • Impact on values stemming from difficulty in buyers raising finance.
  • Acquisitive groups are generally cautious and likely only to pursue the best opportunities.

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