January 16, 2002—Over the last six months the commercial property market has stayed strong despite economic pressures, although demand is set to slow during the first half of 2002.
A third of the respondents to a survey, by the CBI and property advisers GVA Grimley, said they had increased property holdings over the last six months. 11% claimed they had not—leaving a positive balance of 22%, compared with 12% in June.
20% of companies said they expect to increase property holdings and 8% said they will reduce them, giving a balance of 12%. Nearly three quarters (71%) expect their overall property holdings to remain unchanged, compared with 50% in the last survey.
According to the research, the office sector has recorded the strongest increase in demand for property over the last six months. However, the retail sector is expected to be more resilient over the next survey period. A balance of 18% of companies in the office sector recorded increased holdings, but this will level off said the CBI and GVA.
Stuart Morley, head of research at GVA Grimley, commented: “Although business output and employment growth are expected to be much weaker over the next six months, only a slight slowdown of expansion in the property market is anticipated. However, it is also significant that a much larger proportion of companies expect their property holdings to remain unchanged over the next six months than in recent surveys, indicating a noticeable reduction in activity in the property market.”
The research, covering 246 private sector firms of all sizes from all regions, also showed that the difference between large and small firms is likely to become more marked. A balance of 57% of companies with over 5,000 employees reported an increase in property holdings. In the next six months a balance of 37% expect a further increase. That compares with companies with under 50 employees which report little change and show a balance of just 8% expecting to increase property holdings over the next six months.
Demand was highest over the last six months in London and the South East (39%) followed by the Eastern region (28%) and Northern Ireland (25%). All of these regions are slightly higher than in the previous survey.
CBI chief economic adviser Ian McCafferty said: “The unexpected level of growth in demand for commercial property over the last six months reflects the momentum of the domestic economy through the autumn. In particular the office and retail sectors have held up as fears of a slump in consumer confidence have not been realised and consumers have continued to spend. But business optimism continues to fall, as a result of growing uncertainty about the scale and extent of the economic slowdown, and demand for property will weaken again over the next six months.”
—Jessica Jarlvi
Reprinted with permission; copyright 2002 i-FM
