It’s official: like the economy at large, commercial property is back in recession. But if you thought many regions are in bad shape, think again. The reality may be worse than even your most abject fears.
According to new IPD figures, values nationally declined for the second consecutive quarter during the first three months of 2012, by -0.7%. Values remain 31% below 2007 levels. And if you are looking for a terrifying comparison with previous recessions, try this one: by June 1993, values were off just 15% from pre-crash levels in September 1988. By that measure, this recession is twice as bad.
That national picture masks regional horrors. North West offices have recovered just 6% and remain 46% below 2007 levels. Industrial property across Wales has recovered less than 7% of its pre-crash value. South West offices, which remain 45% below their peak, the same.
Like the economy, it’s London that is shoring up the national numbers. The best-performing sector, and the only sector to see values increase above 2007 levels, is West End retail by 4%. West End offices, the next best performer, remains 16% off 2007 highs. City offices remain 27% below pre-crash levels.
The strongest sector outside London is Scottish industrial property. Even here, though, values are 27% below pre-2007 levels. Take London out of the dataset and values have been declining for three consecutive quarters.
Will this picture change? As Estates Gazette went to press, polling booths around Britain were closing. By the time it lands we’ll know the outcome of those votes, including the race for the London mayoralty.
The favourite, Boris Johnson, has campaigned for London to retain a greater share of national GDP. He may struggle to convince the Treasury to yield. But with a vote on Scottish independence looming, the argument over regional economic performance and public spending will intensify.
Oxford Economics expects GDP in the capital to grow twice as fast this year as the UK nationally (0.4% vs 0.9%). And it expects a 60 basis points difference next year, rising to 90bp in 2014 and 2015.
London vs the regions is a debate that will only intensify this year – in every respect.
Are managers in this industry up to the task of turning property’s fortunes around? Not if they are typical of UK plc at large.
According to the latest Employee Outlook survey from the Chartered Institute of Personnel and Development, three-quarters of employers are witnessing a lack of leadership and management skills. Put simply, many managers don’t know how bad they are at managing people.
So eight out of 10 managers say they think their staff are satisfied with them as a manager. Just 58% of employees agree. Six in 10 managers claim they meet each person they manage at least twice a month to talk about their workload. Just 24% of employees say they meet that frequently. More than 90% of managers say they coach the people they manage when they meet, while only 40% of employees agree. You get the picture. It should make for painful reading in this and other sectors.
As the IPD report demonstrates, the environment remains tough. Movement between employers is on the rise. And as this week’s closure of Jones Lang LaSalle’s auctions team demonstrates – as well as the shuttering of the Milton Keynes-based agent Douglas Duff – there are plenty of tough decisions still being taken. Capable management of teams is crucial. Are property’s managers up to the task? Let me know: damian.wild@estatesgazette.com @DamianWild.
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Estates Gazette was last week named Innovator of the Year at the British Media Awards. The judges were impressed by our digital MIPIM editions, Sporting Legacies iPad edition, the new-look EGi and this magazine’s briefing pages. We’re keeping good company these days: other winners included The Economist and The Huffington Post.
