The enthusiasm and momentum for them is apparent both from what the market tells us and from recent surveys. A clear message from our wide range of property contacts is that greater liquidity is essential if commercial property is to remain attractive as an asset class. There is equally a clear message that successful development of securitisation and derivatives will not on its own be the saviour of commercial property. But without it property will not turn in a performance which can stand comparison with competing assets. We need a mature, liquid cash market in property with a healthy derivative market to permit successful management of risk. These are essential characteristics of efficient markets which are necessary for efficient use of property by users as a factor of production. Without such a development there is a risk that the costs of doing business in the UK will be uncompetitively high. I do not know how, or indeed whether, the obstacles to the development of such markets can be easily found. But I regard these issues as nationally important. Conclusion 22 So, what is likely to happen in the next eight years? Let me sum up my vision. 23 The current strong commitment to keeping inflation in check will create conditions more conducive to rational long-term decisions. Commercial property is still to a large extent a longer-term asset and should benefit from this environment.
Mr. Kent examines the challenges facing the UK commercial property market as it moves towards the 21st century Speech by Mr. Pen Kent, an Executive Director of the Bank of England, to The Investment Property Forum Annual Lunch in London on 15/1/97. Introduction 1 The IPF has built up a significant and diverse membership in recent years and has deservedly become one of the most prominent and respected trade associations within your industry. I am delighted to have the opportunity to address you all this afternoon. 2 When Mark Burton suggested that I might look back at developments in the commercial property market during the eight years that I have been doing my present job, that appealed to me because I shall be retiring from the Bank next month. But I also like to look to the future and to identify coming issues and challenges. With that in mind, I will also pick out some of the factors relevant to the industry as it moves forward. The Past 3 My involvement with commercial property began in 1985, when plans for Canary Wharf were beginning to materialise. One of the questions put to the Bank by the developers was whether we would change our policy encouraging banks to have their offices close to the Bank. We recognised that our policy was distorting the market and we decided to make the change. I have followed the property story ever since.