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London & Leeds chief blames short-term thinking for woes.

London & Leeds chief blames short-term thinking for woes

The current state of the real estate market is largely the result of shorterm, "fashion-dominated" thinking, according to Anthony P. Grant, president and chief executive officer of London Leeds Development Corporation.

Grant, who has more than 25 years of experience marketing, appraising, financing and developing major real estate projects in Europe and the United States, delivered a speech entitled "Fashion and Real Estate" at today's meeting in New York of FIABCI (the International Real Estate Federation), whose members represent property interests in 44 countries around the world.

"The dominance of short-term thinking in a business which is concerned with the creation, ownership and management of very long-term assets has led to many of the problems we have witnessed over the last two or three years," Grant said.

Short-term planning has caused the real estate industry to be vulnerable to extreme fluctuations - "dictated by business fashion, according to Grant.

"The overheating and frantic activity of the late 1980's, followed by the real estate collapse of the early 90's, is nothing more or less than a repeat performance of similar events in the early and mid-1970's, he suggested to the assembled guests.

"The similarities between the last year and the 1970's are apparent: a war in the Middle East...a sudden rise in oil prices...a banking crisis due largely to irresponsible lending on overvalued real estate and corporate assets...oversupply of office accommodation...stagnation in the housing market...economic decline and falling corporate profits," said Grant. "This is history repeating itself."

"Just four years ago, all our markets were booming. Popular wisdom said that values could only move in one direction, and to survive as a developer, you had to pay record land prices on the assumption that tenants would be persuaded to pay record rents. The trend was to regard land as having its own inherent capital value, almost regardless of the rental value, in net effective terms, of the finished product."

"Today, as in 1974 and 1975, recession, growing unemployment and a surplus of buildings have caused the financial equivalent of a nervous breakdown," he added. Grant disagrees with the current fashion of regarding the entire office sector as doomed for the decade, with office developers going into hibernation. "This is a gross over-simflication, he said.

"It's apparent the we're at the beginning of a general economic upturn. At five percent, the Federal Reserve Board's discount rate is at its lowest level since February 1973. For property, this means the resumption of growth in values, probably in just over a year's time, toward the end of 1992."
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Title Annotation:Anthony P. Grant, current state of real estate market
Publication:Real Estate Weekly
Date:Oct 9, 1991
Words:436
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