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Valuers: treat tower blocks ‘with considerable caution’ post-Grenfell
Valuations of tower blocks should be treated “with considerable caution” after the fire at Grenfell Tower in June, investment management company Jones Lang LaSalle (JLL) have warned.
In their valuations of properties being used by Clarion to secure the association’s new £3bn debt platform, JLL and Savills, the two leading valuers of social housing, expressed their concerns about the uncertainty surrounding the values of tower blocks included in the portfolio.
Both organisations took into account the costs of repair work known to be necessary. JLL also warned, however, that for the 18 tower blocks it valued, it would “be some time before investor confidence in such buildings amongst social landlords, or purchasers from a mortgagee to a social landlord, will be restored”.
Its report added: “Accordingly, whilst this period of uncertainty endures, we recommend that you should interpret any opinions of value of such buildings with considerable caution.”
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Savills valued 1,222 units in tower blocks at £68.3m for their existing use as social housing, and £76.6m if they were vacant and let at market rates.
It noted: “At this point it is too early to assess the longer-term consequences. In the short-term, however, it is likely that potential investors and occupiers will be more cautious – and the liquidity and pricing of the subject property may be impacted. We would therefore draw your attention to the fact that, in the case of the subject property as at the date of our valuation, there is greater uncertainty concerning the valuation figure than would normally be the case.”
Savills advised that Clarion should commission a special report to examine all aspects of fire safety on the tower blocks involved, “including (but not limited to) the cladding”.
Lenders have expressed worries about the effect of the Grenfell Tower fire on tower block values already, but this is the first time the valuers have openly discussed the uncertainty.
JLL estimated that the period of uncertainty was “likely to persist for some time, perhaps for a number of months, whilst official inquiries and investigations are concluded”.
The outcomes of the government’s review of building regulations, the public inquiry into the Grenfell Tower fire and the criminal investigation into the fire could all have effects on the values of tower blocks. JLL said it would revisit these valuations when these various issues were resolved.
