UK Property Investors Must Manage Risk Amid Recession

As the recession deepens in the United Kingdom, property investors should be aware of the potential risks and take steps to mitigate them, according to John Searing, head of property risk for broker Jardine Lloyd Thompson Group plc in London. The current economic climate has led to a decrease in rents and investment earnings, making it a buyer's market for tenants. This shift in power dynamics means that landlords are not securing the rents they expected, and property owners should be aware of clauses that may allow tenants to escape their leases.

Key Takeaways:

• The current recession has led to a decrease in rents and investment earnings for property investors in the UK.
• The market is shifting in favor of tenants, making it a buyer's market, where landlords are not securing the rents they expected.
• Property owners should be aware of clauses that may allow tenants to escape their leases.
• The drop in insurers' investment income has made underwriting performance critical to them.
• A vacancy rate of 25-30% is considered worrying, as it increases the risk of malicious damage to empty buildings.
• Investors should be aware of the possibility of tenants becoming insolvent and being unable to pay their rent.
• Risk management awareness can vary from client to client, with some prioritizing it and others putting it on the back burner.
• The insurer's message to clients is: "You've got to put some money on the table" in terms of providing risk management services.
• JLT conveys clients' favorable claims records and evidence of their risk management expertise to underwriters to secure lower premiums.

Statistics:

• A vacancy rate of 25-30% is considered worrying in the UK property market.
• The value of a very large insurance company's property portfolio can approach £30 billion (33.8 billion euros).
• JLT tripled the size of its property operations in London during the previous year.
• The market includes both commercial and residential properties, with a bias towards commercial.
• Assets in good condition are more valuable than those in disrepair.

Sources:

• A. M. Best Company, Inc.
• Jardine Lloyd Thompson Group plc