High finance costs continue to hit the commercial property market, with Savills the latest to feel the pain.
Shares in the property agent, which is a member of the FTSE 250, dropped 11% yesterday as bosses warned that their expectations for this year had “reduced somewhat”.
Simon Shaw, chief financial officer at Savills, told the Times: “In early May, the mood music was that rates would soon peak and that [central banks] would start to cut [interest rates] in the first quarter of 2024.
"Things have changed since then and the world is now looking at [rates being] higher for longer. That, I think, has fundamentally delayed some of the recovery we were expecting by probably about a quarter.”
Shares in Savills dropped by almost 11% yesterday
Savills is thought of by many people as a traditional residential estate agent, but that makes up only a tenth of its business.
Its agents broker sales of warehouses, find tenants for offices and look after blocks of flats. Deals have been few and far between this year, however, as higher interest rates have increased financing costs.
In the UK, Savills’ income from commercial property sales and leases fell by a third. Revenues at its residential estate agents declined by a quarter.
Overall group revenue dipped 3 per cent to £1.01 billion between January and June compared with £1.04 billion for the same period last year. The performance would have been worse had it not been for Savills’ property management arm, which delivered an 18% rise in profits.
FTSE 100
The UK's top share index, the FTSE 100, was down 45-points at 7,572 shortly after opening this morning.
Brent crude futures were down 0.19% at $86.29 a barrel.
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