Compared to other western countries there are more researchers and analysts producing, amongst others, more and more statistics on the state of the UK economy, residential house values and inflation statistics.  These figures, when released, are widely seized upon by the media, often in an attempt to spread doom and gloom since ‘bad news sells newspapers’.

There is no doubting that we live in difficult times with some European banks over exposed to sovereign debt, with the likelihood that Greece may well default on its loans and be expelled from the Euro.  Will this have a material impact on the UK commercial property market?  In itself, the answer should be ‘no’, but property remains a long term commitment which businesses make when they are confident on their trading prospects.  If confidence dips, then it often feeds through as justification as to why businesses do nothing as far as committing to property.

There are some stark facts, however, that businesses need to be aware of.  Firstly, there is inflationary pressure in the economy: the first round of Quantitative Easing by the Bank of England whereby £225 billion was injected into the UK economy increased the underlying inflation rate by 1.5%.  The latest bout will have a similar effect and there is likely to be further Quantitative Easing in the future, implemented in an attempt to stimulate the wider economy and the banks to lend money.  Secondly, the pricing of property, whether it is to buy or to rent, is a supply and demand issue.  Whilst demand has been relatively flat, the supply of buildings coming to market is also dwindling, especially of industrial and warehousing properties.  Developers are not committing to speculative development and none of the banks are prepared to lend for speculative development anyway.  This means that there are no new buildings coming through.  Just based on current demand, the consequence of this is that rental and freehold values will rise.  What is not certain is when this will occur.

Today, values on both rent and purchase are probably 30% off the peak that they achieved in the middle part of 2008.  Current values are at the same level that was reached in late 2009, early 2010 and there is, therefore, little prospect of values falling further because of the limited supply.  For those companies that are able to make a commitment to property now, the deals that are available today are unlikely to be repeated.  All of the major high street banks are prepared to lend money to viable businesses for property purchases and landlords are prepared to allow break clauses in leases to give some flexibility to prospective tenants. 

There is no doubting, therefore, that in Northamptonshire there are great opportunities for dynamic forward thinking companies.  Are you one of them?

For further advice on how your business can profit in the current market, call Andy Griffiths on 01536 517777 or email ag@bne.co.uk

Andy Griffiths
14/10/11