Commercial property sector still healthy despite fears

OCCUPIERS of commercial property premises expect to expand their portfolios on the back of continuing growth in output and employment over the next six months, according to new research.

The CBI/GVA Grimley Corporate Real Estate Survey revealed that the outlook is positive in the UK commercial property market despite fears that the economy is slowing.

The survey, which is carried out biannually, claimed that 43% of firms expect to expand their amount of property space over the next six months, while 22% plan to reduce it.

However, manufacturing firms 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, the survey said.

Banking, finance and insurance firms also expected to reduce their property slightly in the first half of this year.

Howard Cooke, a 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.”

More than three quarters of firms (82%) believe that changes to the empty rate relief being introduced in April will have a negative impact.

The Government is to 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.

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 survey also revealed 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.