View from City Road: Ground still soft after Speyhawk

Perhaps the biggest surprise about the collapse of Speyhawk is the ease with which the market absorbed the news. True, it caused a small tremor among those like Greycoat, Ossory, Regalian and Stanhope - all more or less at the mercy of their bankers - but it left their larger brethren like Land Securities, British Land and Brixton Estates relatively unmoved. Nor is there any sign that it has deterred the institutions reputedly clutching more than pounds 1bn that they are desperate to spend directly on property.

Indeed conspiracy theorists were citing the collapse, after 18 agonising months of talks, as proof of the recovery. But if Speyhawk's lenders were swayed by the belief that the fledgling recovery means receivers will find it easier to sell property, they are likely to be disappointed.

Yields may have hardened a little, but only for prime properties with blue-chip tenants on long leases. Demand will eventually filter down to secondary properties, but those stuck with half-let or unlet buildings could be in for a long wait.

It is also a reminder of how much the banks still call the shots in the property market.

Bank lending may have dropped by more than pounds 1.15bn in the four months to March, but it still stands at almost pounds 37bn. They have not so far been selling much of the property they have taken over from distressed borrowers; when they eventually do, it could be a big depressing influence.

The scale of provisions against these loans means the banks will be unwilling to increase their exposure for some time. No wonder the agents are so anxious to humour the institutions, whose cash pile will have to keep the recovery rolling.

Property shares, which have outperformed the market by 12 per cent this month alone, have happily shrugged off such caveats. The reaction yesterday suggests that investors are unconcerned about bad corporate news. If the direct market should stall, however, the response could be rather less sanguine.