Fewer firms expanded their property portfolios over the last six months while many are planning to reduce their holdings in the coming half year, new research has suggested.
The latest CBI/GVA Grimley Corporate Real Estate Survey shows that a balance of +3 per cent said they had increased their property holdings in the last six months, a slower rate of growth than the previous survey (+15 per cent) and below expectations (+7 per cent).
The twice-yearly survey, conducted from August 26 and September 17, 2008, also shows that in the next six months a balance of 24 per cent of firms plan to reduce property space.
Retail, financial services, manufacturing and leisure are the sectors showing the biggest change. Retailers reported that their property holdings increased in the past six months but expect little change in the next.
Very modest growth in property holdings by the leisure sector is expected to be followed by a sharp contraction over the coming half year, and falls in financial services and manufacturing are expected to intensify.
Firms were asked about the impact of the credit squeeze and the slowing economy and about 80 per cent reported each was having an effect on their business.
In the survey, half of firms said surplus property was an issue. About 50 per cent of respondents have surplus property, with retail (66 per cent), extraction, chemicals & utilities (90 per cent), manufacturing (61 per cent) and the leisure sector (64 per cent) carrying a material amount.
GVA Grimley senior regional director Ian Stringer said: “The trend of more firms planning to reduce their property holdings is accelerating, with a significant fall in demand expected over the coming six months.
“Falling business activity and lower demand is likely to increase the property surpluses, which will only push up the cost of paying empty property rates.”
Forty per cent of firms said they had vacant surplus property. Since the reduction of empty property rate relief as of April this year, occupiers must pay full business rates on property after a very short period. Half of the survey respondents said paying vacant rates was having an effect on their business, with transport and engineering firms the most affected.
Over a fifth (21 per cent) of businesses said they were demolishing empty property or were considering doing so, another fifth (21 per cent) were either being forced to or are considering reoccupying vacant space and two-fifths (38 per cent) were speeding up the surrender of their leases to landlords.
The CBI’s head of infrastructure Karen Dee said: “Businesses are paying a billion pounds a year more due to the government’s changes to empty property rate relief. Companies are facing up to a recession and need to reduce costs. The government should look at everything it can do to help businesses through these difficult times and reversing its recent decision on empty rate relief would be one good way of doing so.”