DERBYSHIRE CHAMBER ‘IN BUSINESS’ MAGAZINE
The most common question that I am being asked right now is ‘how bad is the commercial property market?’ Which really translates to ‘will the value of my business property be falling like a residential stone right now?’
Well…….it’s not great obviously but, the market certainly hasn’t crashed. Clearly, most businesses are only taking on board the full cost of relocation if they really, really have to move at the moment. This has reduced the number of new potential players in the market for space, but there are still many people taking much longer term investment decisions who are keen to acquire and move on.
Certain lending institutions are having real problems of liquidity right now and unsurprisingly, loan terms are proving ‘challenging’. This is probably the urban myth that is gathering most press attention to the extent that there are now a great many self–appointed banking experts out there!
Seriously, the principal factors that I think are slowing down the commercial market remain quite localised. Retail trading is quite difficult for a lot of businesses at present. In Derby there are added problems given the on-going tension between the new retail pitch created by Westfield and the Cathedral Quarter to the north of the city centre, which is still struggling to come to terms with the change of dynamics within Derby’s retail market.
Land available for industrial development in and around Derby remains in very short supply; therefore demand for industrial property, whilst a little slower, is still pretty evenly matched with the supply of what is actually out there. I remember working through the last proper full blown recession in the early 1990’s, which was characterised by a massive imbalance between over supply of accommodation against very weak demand with predictably disastrous results. That is not happening this time round.
When will things ‘pick up’? Well, once certain properties are put on the market against their owners’ wishes that creates opportunities. Those speculators are already starting to roam around our area.
One very significant driver has no linkage to the credit crisis – instead it is new legislation centred on removing relief for property owners carrying empty buildings. From 1 April 2008 the Government has put in place plans to cash-in on empty properties by charging firms for potentially the full cost of business rates for up to three or six months. This will prompt certain businesses into finding creative ways of reoccupying property through, for instance, shorter term lets, but it could also lead to eye-sore pockets of sites as the rebuilding process will not trigger the full cost of empty rates.
Challenging times……but as ever, if you have a commercial property, take the right kind of advice.
