Firms have continued to cut their property holdings in the past six months, the latest CBI/GVA Grimley Corporate Real Estate survey reveals.
This follows widespread space reductions since the turn of the year, and further shrinkage over the next six months is expected.
The twice-yearly survey, conducted between 26 August and 16 September 2009, shows that while 12% of firms increased their occupied space in the last six months, 25% reduced it, giving a balance of -13%. This was slightly less negative than the expected balance of -25%.
The survey also reveals, however, that a similar fall is expected in the coming half-year period (a balance of -15%).
Financial services firms recorded the sharpest property contraction over the past six months, with the engineering sector and transport, warehousing and distribution companies seeing the next steepest falls. The sharpest decline in the next six months is expected to be in the financial services sector again.
Three sectors – leisure (including hotels, bars & restaurants), retail and construction – reported an increase in property holdings over the past six months and the same sectors anticipate a rise in the next six.
During the recession, cost reduction and cash flow remain the most important issues affecting companies’ property decisions.
Firms were again asked about the impact of the credit squeeze and the slowing economy on their business. Access to credit was having at least a noticeable effect on 68% of firms and the economy on 85%. These were up from 62% and 81% respectively last time.
Howard Cooke, Director at leading property consultant GVA Grimley, said:
“With little let-up in the impact of the recession, firms have continued to reduce property holdings in the past six months. Unfortunately, these cuts will continue as long as the poor economic climate persists.
“Yet again, most firms feel some impact from the recession, with slightly more blaming tighter credit conditions than six months ago.”
The survey shows an increase in the number of companies that would consider moving at least part of their business abroad. Almost a third (32%) said there were issues that would make them relocate away from the UK, a significant rise on 15% a year ago.
This time the two most important reasons given by firms for considering relocating are the tax system and the economic environment, with larger firms more likely to consider a move than smaller ones. Among the different sectors, financial services firms are the most likely to say there are issues that would make them relocate (73%), followed by engineering (68%) and manufacturing (42%).
The number of firms considering exercising a break clause in their lease, which gives one or both parties the right to terminate a lease before it has ended, has increased. In this survey, over a half (51%) of firms with leasehold property are considering exercising a break clause over the next two years, up from a third (35%) in the spring. Among companies with more than 5,000 staff, 90% are considering using breaks as a method of reducing property holdings.
Since empty property rate relief was reduced a year and a half ago, occupiers must pay full business rates on empty property after a very short period, and the CBI has lobbied for the relief to be re-instated.
Matthew Farrow, CBI Head of Infrastructure and Planning policy, said:
“In the recession, firms are looking to cut their property costs wherever possible, but the Government’s failure to restrict next year’s rate rises to 7.5%, as we had proposed, together with the ongoing loss of empty property rate relief risk is making a difficult situation even worse.
“As a start, the Government should use the Pre-Budget Report to restore the original level of empty property rate.”
November, 2009
Notes to Editors:
The survey was carried out between 26 August and 16 September 2009 and covered private sector firms of all sizes and from all regions, but did not include those from the agricultural sector. 204 firms responded.
- The references made to positive and negative balances refers to the difference between the weighted percentage of companies reporting an increase and those reporting a decrease, ignoring those reporting no change. For example, if 23% of companies had reported an increase in property holdings, 18% a decrease and 59% no change, then this would represent a positive balance of 5%, implying an overall increase in property holdings.
- The full survey is attached. Hard copies are available to the media from the CBI, Centre Point, 103 New Oxford Street, London WC1A 1DU, tel: 020 7395 8239; it is also available from GVA Grimley, 10 Stratton Street, London W1J 8JR and at www.cbi/org.uk/bookshop or www.gvagrimley.co.uk
- The CBI is the UK’s leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. No other UK organisation represents as many major employers, small and medium-size firms or companies in the manufacturing or service sectors.
- GVA Grimley Ltd is one of the UK’s leading firms of property consultants operating from 12 offices with 838 fee earners generating a turnover of £148 million year ending 30th April 2008. In the six months ended 31 October 2008 the firm generated turnover of £65 million compared with £72 million in the six months ended 31 October 2007. The firm provides a full range of property-related services including agency, planning and regeneration, rating, building consultancy, investment, management and valuation consultancy. GVA Grimley also offers specialist advice in areas such as telecomms, education, healthcare, retail, contamination, plant and machinery and the automotive and roadside sectors. GVA Grimley is a founding member of GVA Worldwide with a global reach throughout Europe, North America and Australasia, with real estate representatives in 90 offices serving 20 countries. For further information about GVA Grimley please visit www.gvagrimley.co.uk
The CBI Annual Conference will take place on 23 November 2009 at the London Hilton on Park Lane. To accredit, please follow this link: http://www.cbi2009conference.org.uk/media.asp and enter your details on the online Media Accreditation form. You will need to upload a photo.
The CBI Annual Conference always draws together exceptional leaders of business and politics. You can access the day’s programme here: http://www.cbi2009conference.org.uk/programme.asp?ref=programme
Attachments:
Media Contact:
Stephen Cooke in the CBI Press Office on 020 7395 8239 or out of hours pager on 07623 977854.
Edward Dewar in the GVA Grimley Press Office on 0207 911 2664 or email: edward.dewar@gvagrimley.co.uk
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