Most companies are feeling the effect of the credit crunch and planning to reduce their property holdings, according to the Confederation of British Industry and Grimley Coporate Real Estate.
In the joint Corporate Real Estate Survey, a twice-yearly survey conducted between 27 August and 17 September 2008, it said that only 3% of the firms surveyed had increased their property holdings in the last six months, a slower rate of growth than the previous survey which was +15% and below (+7%) expectation.
It said 24% of firms planned to reduce their property holdings in the next six months.
Retailers reported that their property holdings increased in the past six months but they expect little change in the next. Very modest growth in property holdings by the leisure sector is expected to be followed by a sharp contraction over the coming half year, and falls in financial services and manufacturing are expected to intensify.
Around 80% of the firms surveyed said the credit crunch and the slowing economy was having an effect on their business whereas in the last survey, the impact from the credit squeeze was still contained largely to the financial services sector.
Half the firms say surplus property is an issue with round 50% of respondents reporting surplus property, with businesses in the retail (66%), extraction, chemicals & utilities (90%), manufacturing (61%) and the leisure sector (64%) carrying a material amount.
Sales to increase
Howard Cooke, director at property consultants GVA Grimley, said: ‘The trend of more firms planning to reduce their property holdings is accelerating, with a significant fall in demand expected over the coming six months.
‘Most firms are now feeling at least some effect from the tighter lending conditions and the economic slowdown. Falling business activity and lower demand is likely to increase the property surpluses, which will only push up the cost of paying empty property rates.’
40% of firms in the survey have vacant surplus property which are now subject to full business rates following the removal of empty property rate relief as of April this year. Half of the survey respondents said paying vacant rates was having an effect on their business, with transport and engineering firms the most affected.
Over a fifth (21%) of businesses said they were demolishing empty property or were considering doing so, another fifth (21%) were either being forced to or are considering reoccupying vacant space and two-fifths (38%) said they were speeding up the surrender of their leases to landlords.
Karen Dee, the CBI’s head of infrastructure, said: ‘Businesses are paying a billion pounds a year more due to the government’s changes to empty property rate relief. Companies are facing up to a recession and need to reduce costs, so this could not have come at a worse time.
‘The government should look at everything it can do to help businesses through these difficult times and reversing its recent decision on empty rate relief would be one good way of doing so.’