The current shortage of new serviced offices is well documented. Capita Symonds recently released figures showing that demand for developments of serviced offices is at its highest since the 1980s. It reveals that only twelve projects of more than 20,000 sq ft were initiated in the first three months of 2011, compared to thirty-nine for last year’s equivalent period.
Land banking firms are one source tapped by developers seeking the right location for new serviced offices; unfortunately for the sector, a small number of them are regularly in the headlines, guiding some unlucky investors onto the rocks of misfortune.
A report released by the Insolvency Service found two land banking companies guilty of misleading the public, by raising an estimated £1m selling plots of land it did not actually own. Investment Consultancy Limited and Queensgate Consultants Limited (not to be mistaken for firms with similar names) made exaggerated, duplicitous claims regarding land in East Sussex, Telford and Bromley. Investors were led to believe the plots had serious development potential, a claim without any credence. Following investigation by the Insolvency Service, the companies were ordered into liquidation.
In another case, the National Fraud Intelligence Bureau (NFIB) uncovered evidence of fraudulent land banking affecting ninety victims, with accumulated losses edging towards the £3m mark. The NFIB advises common sense precautions to avoid the few land banking companies blighting the sector, including conducting independent internet research, consulting an independent advisor, checking with the council for planning permission prospects, and so on.
Unscrupulous land banking companies employ ‘boiler-room tactics’, the practice linked to investment fraud in share dealing. A seller will use aggressive methods to place potential investors under extreme pressure to buy shares in a company, advising them to act quickly or risk losing out. A mixture of phone calls, mailshots and brochures are employed. Once the money is transferred, the shares are found to be of little value, or even non-existent.
Those seeking land for serviced offices are warned by Insolvency Service Investigations Supervisor Chris Mayhew: ‘If it sounds too good to be true, it usually is.’
