15 Jan 2008
Despite signs that the economy is slowing,
occupiers of commercial property expect to expand their property
portfolios on the back of continuing growth in output and
employment over the next six months, the CBI/GVA Grimley
Corporate Real Estate Survey has revealed.
The twice-yearly
survey, conducted between 24 October and 14 November, reveals
43% of firms expect to expand their
amount of property space in the next six months, while 22%
plan to reduce it. This balance of +21% is just below the
rate occupiers expanded their space over the last six months
(a balance of +22%).
However, firms in extraction and manufacturing
sectors saw an overall contraction in property holdings over
the last
half year period and expect to continue reducing their property
space in the next six months.
Banking, finance and insurance
firms also expect to reduce their property slightly in the
first half of this year (a
balance of -2%) but, if unconstrained, half of businesses
in this sector would contract their space, while only around
a quarter would expand it - giving a much larger negative
balance of -23%.
Howard Cooke, director at property consultants
GVA Grimley, said: "The desire in the finance and manufacturing
sectors to reduce property space can be attributed both to
concerns
about the impact from the credit squeeze over the next six
months and the surplus space that these sectors traditionally
carry.
"
But this survey does not support the speculation about a
crisis in commercial property. Firms are still expecting
to expand their property occupation much as they have in
recent months. A watchful eye should be kept on how the coming
changes to empty rate relief affect occupier behaviour, however,
as these are likely to have some negative consequences."
Most
firms (82%) believe that changes to the empty rate relief
being introduced in April will have a negative impact. The
government will scrap the 50% relief on business rates from
which all non-industrial firms currently benefit three months
after a property has become empty. Relief currently given
to manufacturers of 100% in perpetuity will now last just
six months.
Whether or not the change has its desired
effect of encouraging landlords to make more efficient use
of empty
properties,
the cost to business is estimated to be nearly £1bn
a year and the decision could have other negative consequences.
Karen
Dee, the CBI’s head of infrastructure said: "The
higher cost of owning an empty building could make regeneration
less viable and demolitions are likely to increase. Businesses
can also get caught in leases, which make them liable for
empty rates even when the property is no longer suitable
and they cannot pass the property on."
The CBI has urged
the government to relax its approach to empty property
rate relief, before the regulations come into
effect this April, by introducing an 18-month relief period
to allow firms a realistic amount of time to dispose of
empty property.
The government must also commit to monitor
the impact on levels of development and demolition. There
is already
evidence that development has been made unviable by the
threat of
these rates.
The survey reveals that many firms are
unaware of the requirement being introduced this year for
landlords
to obtain an Energy
Performance Certificate (EPC) for their buildings.
The
largest buildings will need an EPC from April and the rest
by October. Occupiers will need to be aware
of them
when acquiring or disposing of property but can make
use of the information in their decision-making.
Whilst
three-quarters of businesses in the survey say they look
at energy costs and the efficiency of buildings
before
they acquire space - 9 out of 10 do so in certain
sectors - EPCs are a good way to judge a building's likely
efficiency and running costs. Half of firms (51%)
are
either unaware
or have not so far acted so communication over the
next few months will be vital.
While location and
costs are still the most important drivers in finding the
right commercial property,
the survey shows
energy efficiency now ranks alongside public transport
and design as a factor. Respondents say the most
important benefits
to business of choosing a greener property are
cost-savings as well as acting as a responsible business.
When
asked, 61% of firms said they would pay at least
a little
more rent for a sustainable building.
