UK Corporate Real Estate Execs to Reduce Office Portfolios
In its Autumn 2008 Survey of CRE managers, London-based GVA Grimley reports significant pessimism and plans for portfolio contraction across the board, particularly in leisure (hotels & restaurants), retail, and financial services sectors.
Among the findings, personnel cuts have left 50% of the corporate real estate users with surplus property, and 40% sitting on completely vacant sites. Rather than hold the space for better times (e.g. subleasing), a strong C-level emphasis on cost control and profitability has over half of all firms aiming to downsize their portfolios by up to 25% in the coming months, mainly through lease terminations (”lease breaks” to the Brits) and non-renewals. The survey was conducted largely before the dramatic economic problems of the past month.
The complete executive summary points out:
• Business confidence has continued to fall since the Winter 2007 survey.
• Significant job losses are expected across many sectors as output expectations have weakened.
• Occupier demand for property has eased in the last six months and looks set to fall in the next six months.
• The majority of sectors are reporting significant effects from the credit squeeze and the economic slowdown.
• Over half of Corporate Occupiers would ideally shed up to a quarter of their leases.
• Corporate Occupiers are intending to exercise a significant number of breaks and not renew leases expiries.
• Half of all Corporate Occupiers are carrying surplus property, and over three quarters of those have vacant property.
• The changes to vacant rates are having the biggest impact on medium size firms and those in the engineering and transport sectors.
• Business is being driven by profitability and reducing costs.
• Property decision making is based on cost reduction and the contraction or expansion of the business.
Although the report contained nary a positive remark, there is always the implicit fact that “Negative Absorption Means Opportunity” for corporate real estate professionals, as discussed here a short time ago. For those who are poised to grow (or just renew), now is the time to get out there, push great lease deals, and “go long”.
The Confederation of British Industry (CBI) co-publishes the survey with GVA Grimley.
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