Standing strong: In the midst of the credit crunch, a panel of industry experts share their views on how occupiers are surviving the downturn. Edited by Noella Pio Kivlehan
Howard Morgan, managing director of Kingsley Lipsey Morgan and panel chairman, asks: How is the downturn affecting your business and occupier markets?
David Guest, Bruntwood Estates: “There is not enough cash, and that has to hit at some point. But, regionally at the moment, all of our markets are strong. People are wanting to look for space, our rent collection is as good as it ever has been, so there isn’t an indication yet, for us, regionally, that it is having an effect. However, it’s impossible to measure at the moment because everything is contradictory.”
Neil Taylor, Ordnance Survey: “The difference is that the cash is there in terms of revenues from day-to-day business operations – what’s disappeared is the availability of debt. We’re fortunate that our revenue is not entirely dependent on the property market base – our revenues come from that government and navigation, the TomToms, Googles, and services like that.”
Susie Gray, Land Securities Trillium: “From a revenue generation point of view, I think the occupiers are still quite realistic and at this point haven’t indicated to us that there are any particular problems.”
Elspeth Miller, Mapeley Estates: “We only have a small vacant portfolio so we are lucky and we are predominantly backed by customer-guaranteed income for our investment portfolios. We’re confident in our revenue generation and it has continued to grow well.
“We have the opportunity to restructure the portfolio and match up government departments vacating at the same time as leases burn off and expire, so we can back out that risk by matching up a move and expiry. It’s hard work but that’s what we’re trying to do to minimise the risk exposure.”
Nigel Wheeler, Jones Lang LaSalle: “To date, there has been no sign of distress in the occupier base and no noticeable increase in voids. But I do think there is a tension as occupiers look further into the future.”
Liz Peace, British Property Federation: “It’s interesting, isn’t it? It just depends on who you talk to. I certainly feel it is part of my job to be pretty optimistic or at least not quite so bearish as the press have chosen to be. All of my members who are at the bigger end of the market mostly have substantial war chests and they are very well founded – they seem to be weathering the storm, at the moment, extremely well.
“But I was talking to a certain well-known agent yesterday who left me in deep depression. He thought it could go only one way. So the answer is that we don’t quite know. The one thing we are going to have to watch is across the Atlantic the American recession. The big financial services sector occupiers here? They will still have to hang onto space so maybe we’ll have something to thank our leasing practices for.”
Gary Alden, Mersey Partnership: “In the office market we’re finding there are a lot of enquiries coming out of London for back offices. I think the credit crunch has focused the mind and a lot of banks are saying why are we paying £50, £60, £70 per sq ft? I can’t see a peak at the moment because the interest is gaining momentum. We’re flat out trying to accommodate visits from London offices.”
Howard Morgan: What are your practical tips for surviving the downturn?
Gray: “For a landlord, to concentrate on cashflow, not asset value.”
Sue Tosh, Old Mutual Investment Group Property Investment: “To focus on relationships that are at play here – a downturn is a downturn for everybody and we need to find creative solutions.”
Miller: “Where we are as an occupier we want flexibility from our landlords as a landlord, talking to your customer can potentially give you the opportunity to regear your lease. ‘Tell us about your plans because we can release some capital’.”
Wheeler: “The thing that irritates customers more than anything is the unknown suddenly hitting them on the doormat. Property managers and agents have really got to focus on delivering the service charge code in the spirit that it is intended to be applied.”
Adlen: “It is an old cliché but it’s very true: the customer is always king. I get the impression sometimes with the property market that there is a bit of rigidity there which can put people off.”
Peace: “One of the things we’ve absolutely got to do over the next few years is measure and reduce resource consumption – it doesn’t matter if you believe in global warming or whether you think it’s man-induced, it actually makes sense from a stewardship perspective to manage resource consumption and indeed waste production better. And if you can’t measure it, you can’t manage it. You’ll be forced to sooner or later, so get ahead of the game.”
Taylor: “Green issues are not a fad. From an occupier’s perspective, we are deadly serious. Conversely, the pace at which business is changing and the way in which we carry out our business is having an impact on the buildings we occupy that has never existed before. Consequently, we need the buildings we occupy to change faster than has been the case. Buildings need to change faster.”
John De Lucy, The British Library: “Realise how you can use public buildings differently and public space to great effect. Our public realm is actually much more useful than people realise.”
Sue Flatto, Real Service: “See people, not buildings – buildings are there to service the occupiers that are in them. We mustn’t forget that.”
Guest: “Stop hiding behind letting and managing agents – be visible to your customers and take ownership of all your decisions.”
The panel convened at this year’s MIPIM.
