View point: Whatever the economy does, business still needs an operating base

Aug 13 2008 by Jane Thompson, development manager at Prospect (GB)

THE current economic conditions are undoubtedly presenting property developers and investors with increasingly difficult challenges in the face of the banks and lending institutions battening down the hatches when it comes to financing property.

As a result, the property industry, well used to a cyclical existence, is intent on holding up values and minimising its costs to survive any gathering storms.

Whatever the economy does, business still needs an operating base. Although companies will now have an even keener eye to overheads, new and expanding businesses will continue to take up existing vacant stock, and there will always be market movement, even though some of it comes as a result of companies downsizing or relocating elsewhere for their future well-being.

Developers and property owners are now working their existing stock hard to maintain income flow and are actively seeking ways to save themselves and their tenants’ costs through proactive and creative asset management.

The nature of occupier demand has also morphed in most sectors. If companies cannot secure loans to fuel their property needs, particularly in terms of freehold purchase, then take-up on sales will weaken. However, demand does clearly exist from potential occupiers wanting to buy commercial property.

Given the constraints in the financial markets, these companies may have no alternative but to opt for leasehold property instead with many securing an option to purchase at a later date when they hope the banks will again open their doors to lending.

The more flexible and far-sighted developers and landlords will continue to do well and mitigate losses.

The rationale has to be to work closely with existing and future tenants to retain them, and to help them to survive any downturn in their industry sectors in a realistic and helpful way.