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Firms continuing to cut property holdings – CBI

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.

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 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 5000 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."

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