Occupier demand for commercial property is expected to be sustained despite falling confidence about the general business climate, according to a new report from GVA Grimley and the CBI.
The survey shows that 15% of companies had increased their property holdings over the past six months, while 9% had reduced them. The balance of 6% is slightly down on the 9% of the previous six months and below the 10% that had been expected.
However, demand is expected to go on growing at a similar rate despite deepening concerns about the wider economy.
Over the next six months, 6% of companies said they would increase their property holdings.
The sectors planning the biggest increases in the property they occupy are banking, finance, insurance and business services. Sectors planning to cut their property portfolios include distribution, hotels and retailing.
Stuart Morley, head of research at GVA Grimley, said: “Occupier demand is expected to rise at the same rate over the next six months as over the past six months, despite a deterioration in business optimism and an anticipation of weaker economic output growth.”
He added: “Stronger employment growth is expected to offset weaker output growth, particularly in the finance and business services sector which is good news for the office sector. Stronger office and retail demand from occupiers is expected to offset weaker manufacturing and distribution demand.”
CBI head of economic analysis Doug Godden said: “Cost pressures from rising interest rates, oil and commodity prices have reduced optimism compared with six months ago and that is having some impact on the of demand for commercial property. But demand growth has not stopped. We are seeing an orderly moderation rather an abrupt slowdown.”
Over the past six months demand for shops and offices grew quickest, but by less than the 10-year average. The two sectors saw an improvement in demand compared with the previous survey and expect to increase holdings at a faster rate over the next six months.
Demand for warehousing grew almost as quickly but is expected to slow. Demand for factories barely grew at all but this was an improvement on the decrease seen in the previous survey. Over the next six months no growth at all is expected.
Asked what would hold back their demand for commercial property respondents most often cited a lack of suitable property and inadequate returns. In the previous survey, the difficulties of disposing of property and uncertainty over demand were the biggest constraints.
References: EGi News 16/12/04
