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LONDON-The pace of change in the property sector is increasing, according to a new report by Reading University for the Corporation of London and the RICS Foundation. But the report detects a continuing resistance to innovation within the industry.

The report, ‘Financial Innovations in the UK Property Markets,’ says new financial techniques are becoming more common. Debt- and asset-backed securitisations like British Land’s £1.5 billion ($2.175 billion) deal at Broadgate in the City, are an increasing part of the property investor’s armoury. At the same time, new securitised investment vehicles are emerging.

In part, this reflects the globalisation of the property industry with most large UK agents now part of world-wide alliances, claims the report. And it also says that the increasing role of investment banks and management consultancies in the sector has brought in experience from other capital markets.

However, the report criticised conventional valuation methods for preventing the benefits of this new flexibility from being shared with property occupiers. ‘Traditional valuation methods understate the investment worth of shorter or non-standard leases when compared to modern pricing methods,’ it notes. ‘Since asset valuation is fundamental to the development of active securitised debt and derivative markets, this presents a constraint to innovation.’

Yet, there is clear demand for change among property occupiers. A recent RICS survey found that only 8% of respondents thought that the UK leasing system was completely satisfactory against 27% who thought it unsatisfactory and said it undermined their organisation’s operational efficiency.

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