The Property Masters The Property Masters A HISTORY OF THE BRITISH COMMERCIAL PROPERTY SECTOR Peter Scott Business History Unit University of Portsmouth Business School UK @ Taylor & Francis ...." Taylor & Francis Group LONDON AND NEW YORK Published by Taylor & Francis 2 Park Square, Milton Park, Abingdon, Oxon, OXl4 4RN 270 Madison Ave, New York NY 10016 First edition 1996 Transferred to Digital Printing 2008 © 1996 Peter Scott Typeset in Great Britain by Saxon Graphics Ud, Derby ISBN 0 419 20950 6 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the UK Copyright Designs and Patents Act, 1988, this publication may not be reproduced, stored, or transmitted, in any form or by any means, without the prior permission in writing of the publishers, or in the case of reprographic reproduction only in accordance with the terms of the licences issued by the Copyright Licensing Agency in the UK, or inaccordance with the terms of licences issued by the appropriate Reproduction Rights Organization outside the UK. 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To my parents Contents Acknowledgements x Glossary of abbreviations and technical terms xiii List of tables xvii List of figures XIX Foreword Jack Rose xxi Chapter 1 Introduction 1 1.1 The aims of this study 1 1.2 Scope, sources and methodology 4 References and notes 7 SECTION ONE THE EVOLUTION OF THE BRITISH COMMERCIAL PROPERTY MARKET SINCE 1800 9 Chapter 2 The emergence of a commercial property investment market 1800-1918 11 2.1 Introduction 11 2.2 'Traditional' landowners and the nineteenth century urban property market 11 2.3 Insurance company investment in the property sector 1800-1870 14 2.4 The changing nature of the property investment market 1850-1914 18 2.5 City office development and the property market 21 2.6 Insurance companies and the property market 1870-1918 26 References and notes 34 Chapter 3 The growth of a national commercial property market, 1919-1939 38 3.1 Introduction 38 3.2 The growth of market intermediaries 39 3.3 The 'multiple revolution' and the property investment market 48 II'- ____________ viii C_O_N_T_E N T_S_ __________ -----.J Appendix: The mathematical derivation of the steady state of corporate growth equation 63 References and notes 64 Chapter 4 Property investment, development and the capital market between the wars 68 4.1 The pattern of institutional property investment 1919-1939 68 4.2 Property companies and the property development market 73 4.3 Property development finance 83 4.4 Entrepreneurship in the inter-war property investment market 90 References and notes 95 Chapter 5 War and recovery 1939-1954 99 5.1 The Second World War 99 5.2 Property investment and the capital market 1945-1954 104 5.3 The financial institutions and the property entrepreneurs: 1945-1954 117 References and notes 128 Chapter 6 The property boom 1955-1964 132 6.1 Introduction 132 6.2 Property investment and the capital market 1955-1964 133 6.3 Institutional investors and the property developers 1955-1964 141 References and notes 162 Chapter 7 From Brown Ban to Barber Boom 1965-1973 166 7.1 Introduction 166 7.2 The property investment boom 166 7.3 The property development market 1965-1973 174 References and notes 187 Chapter 8 The property crash, aftermath and recovery 1974-1980 193 8.1 Introduction 193 8.2 The property crash 194 8.3 Recovery and boom, 1975-1980 201 Referen ces and notes 209 Chapter 9 The best of times and the worst of times - the commercial property market since 1980 213 9.1 Introduction 213 9.2 The retreat ofthe institutional investors 1981-1984 213 9.3 The changing face of commercial property 215 9.4 The merchant developers 221 9.5 The Big Bang Boom 1985-1989 223 CONTENTS I I ix 9.6 The second property crash 229 9.7 The green shoots of recovery 236 References and notes 239 SECTION TWO A STATISTICAL ANALYSIS OF THE COMMERCIAL PROPERTY MARKET 245 Chapter 10 A statistical overview of the property investment market 247 10.1 Introduction 247 10.2 Net investment in property 1922-1993 247 10.3 The composition of institutional property portfolios 1870-1990 260 10.4 Initial yields on investment property 1920-1993 266 10.5 Market rents 271 10.6 The rate of return on investment property 1921-1993 274 References and notes 284 Chapter 11 An econometric analysis of property returns and the volume of institutional property investment 286 11.1 The long-term determinants of rates of return and net investment in UK property 286 11.2 The determinants of investment property capital values 291 11.3 The determinants of the volume of institutional property investment 294 References and notes 296 CHAPTER 12 CONCLUSIONS 297 References and notes 306 Bibliography 308 Index 321 Acknowledgements Conducting the research for this study would not have been possible without the help of a number of institutional investors and other organizations which allowed me access to their private business papers. I am particularly indebted to the archival and investment staff of the Church Commissioners, Clerical Medical, Legal & General, the National Provident Institution and Standard Life, whose generous and patient assistance enabled me to assemble comprehensive case studies of their property investment histories. A number of other organizations have also provided me with access to their archives; I would particularly like to thank Brixton Estate pIc, Colliers Erdman Lewis, Eagle Star, the Estates Gazette, Healey & Baker, Hillier, Parker, Marks & Spencer pIc, Pearl Assurance and the Prudential, plus several other institutions which let me check through their archival papers, but had no surviving records covering the information I was seeking. My thanks are also due to a number of record offices which assisted me with this project, particularly the Church of England Record Centre, the Guildhall Library, the Public Record Office and the West Yorkshire Archive Service. Stanley H. Burton gave me access to sections of the Montague Burton papers which are not normally open to the public and provided me with a copy of an additional unpublished paper, for which I would like to thank him. Richard Barkham, John Dunbabin, John Lawrence, T.W. LaPier, Ralph Turvey, J. Whitley, J.H. Treble and John Butt generously provided me with access to work they had undertaken which was unpublished at the time of writing. I would also like to thank Alison Sharpe for her help with my research on Legal & General, and Stephanie Jones for help with my work on Hillier, Parker. Archival evidence can only provide an incomplete picture of the past; my research was greatly assisted by being able to conduct a number of interviews with people who are, or have been, active in the property investment and/or development markets. I am grateful to John Crickmay, Arthur Green, Michael Hallett, Arthur Hemens, Bernard High, Paul Orchard-Lisle, David Ormerod and Tony Overall, who granted me interviews. Particular thanks are due to Edward Erdman, Jim Pegler and Jack Rose, who gave me access to their unpublished memoirs and other written work, in addition to the interviews I conducted with them, and to J. Max Keyworth for allowing me to quote from his privately published history of the Covent Garden property companies. --'I I '--_________A _C_K_N_O_W_L_E_D_G_E_M_E_N_T__S ________ xi I would like to give special thanks to the Investment Property Databank for their help with some of the statistical aspects of my research, and to Allsop & Co., DTZ Debenham Thorpe Research and Jones Lang Wootton for allowing me to make use of their data. My thanks are also due to James Foreman-Peck, Ken Mayhew, Sean Pascoe and Andrew Ryan for their advice regarding my various attempts at econometric analysis of the property market, and to Paul Gandy for his help with the mathematical derivation of the steady state of corporate growth equation, outlined in Chapter 3. The original idea of writing a history of the property investment market was conceived in 1989 at the London School of Economics, and stemmed from an MSc dissertation I undertook there in the Department of Economic History. My thanks are due to Leslie Hannah, Paul Johnson and the Prudential Property Research Team for their help with this earlier project. The first incarnation of this study was assembled as a DPhil thesis in Modern History at the University of Oxford, the research for which involved considerable travel to London and elsewhere. I am grateful to the Economic and Social Research Council, the trustees of the Michael Postan Award, and Merton and Pembroke Colleges, Oxford, for their financial support with this research. I would also like to thank Tom Elliott, Shan Mitra, Rupert Nabarro, Katie Peters, Andrew Ryan and Richard Truscott for helping me to arrange accommodation in London during my research, and my sister Ruth for helping me with accommodation in Edinburgh. My work on the recent history of the property market was further developed after the completion of my thesis, while I was working as a part-time consultant with London Economics. Particular thanks are due to John Kay, Nick Morris, Bill Robinson, Ron Smith and Nick Stern for their help and advice during this period. The long process of transforming my thesis into a book has largely been undertaken during the last year; I wish to thank my colleagues in the Economics Department, University of Portsmouth, for all their encouragement and support. A number of people provided me with useful advice after reading through sections of this study, the thesis from which it was developed and a number of papers I produced in connection with this project; thanks are due to Richard Barkham, Virginia Bainbridge, Sue Bowden, Francesca Carnevali, Christina Fowler, Andrew Godley, Cliff Gulvin, Mark Hampton, Leslie Hannah, Carol Heim, Katrina Honeyman, Lester Hunt, David Kells, Katie Peters, Chris Reid, Tim Rooth, Pa ul Walker and Oliver Westall. I also wish to thank Nigel Wratten for his help and advice with my research, and Kate Pattullo, whose help with the intricacies of WordPerfect 5.1 and Excel saved me a great deal of time and frustration. Thanks are due to the following people and organizations for allowing me to reproduce the photographs in this book: Jeremy Burton (Montague Burton and Burton store); City of Coventry Central Library (Coventry precinct); Clerical Medical (Sir Andrew Rowell); Greater London Library (Elephant and Castle Centre); Guildhall Library (Fountain House); Healey & Baker (Aubrey