Commercial Market Commentary - February 2009

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The flow of statistics and data released by various corporate, financial and economic bodies since the turn of the year has continued in a downward direction. There are though a few glimmers of light in what appears to be a very dark tunnel in the commercial property.

The much vaunted government backed Enterprise Guarantee Scheme has now filtered its way through to a few of the countries many lenders. For the right viable business, and the key word here is viable, funds of between £1,000 and £1,000,000 can be made available. There are as you would expect a number of qualifying hoops to jump through but it will be an important source of working capital for many companies who have exhausted the facility available through their overdraft. It is important to remember that the funds are only available until March 2010 so now is the time to apply if you think you may be eligible. Businesses can apply through their own relationship manager of via any commercial broker.

February saw a slight increase in commercial property activity. The serviced office sector has seen a big increase in new enquiries as businesses look to downsize and reduce their costs. These facilities are very flexible with only a short licence agreement being required. Space can be added to very easily and therefore costs controlled. They can be a great stop gap as businesses recover and consolidate.

Leasehold
The next few months will be particularly difficult for many businesses. Those who pay their rent quarterly will be looking at the end of this month with some trepidation. So what can you do if you are unable to pay? Well first of all don’t panic. Many landlords face the same economic difficulties as the rest of us and in most cases will be willing to help out in some way. Quite often it is a case of asking. There are several things that a landlord can do to help out. Temporary rent reductions, rent holidays and even a change in payment pattern from quarterly to monthly are just some of the things that can be discussed. There is a lot of very technical jargon used in the commercial property industry about yields and such like. However in the current market things are very simple, landlords have to do whatever they can to keep “bums on seats”.

Freehold
On the freehold front there continue to be some great opportunities as values continue to fall. The national pub companies are still struggling with the size of their debt and serviceability of this is becoming an increasing issue as pubs continue to close. They have been forced to put the freehold of many struggling pubs on the market at what can be called “knock down” prices. The issue for the potential buyers of these properties continues to be raising finance. A deposit of at least 40% would be required which puts the dream of running their own pub out of many peoples reach. The big supermarkets and seem to be the ones picking up the bargains in this market as they seek to snap up many closed pubs and turn them in to small local retail units.

In lending we have seen several of the high street banks edge back into the market, whilst others have pulled the shutters down completely. One interesting phenomenon we have seen in the last few weeks is a big drop in moral amongst bank employees. This is understandable given the level of redundancies in the industry. The most important effect of this has been a drop in service levels across the board. This doesn’t help anyone and has come at a time when the limited amount of lending that is being done will be vital to getting the industry moving again. Regaining stability once the banks have restructured will be vital.

For market commentary on Commercial Property please contact: Barry Frost from Commercial Plus on 01244 680360 or 07973 760701. Email: barry.frost@commercialplus.co.uk
 

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