Fewer firms expanded their property portfolios over the last six months, and firms are planning to reduce their property holdings in the coming half year, the latest Confederation of British Industry (CBI)/GVA Grimley Corporate Real Estate Survey revealed.

The twice-yearly survey, conducted between 27 August and 17 September 2008, reveals a balance of +3% said they had increased their property holdings in the last six months, a slower rate of growth than the previous survey (+15%) and below expectations (+7%).

In the next six months, a balance of 24% of firms plan to reduce their property space.

Retail, financial services, manufacturing and leisure are the sectors showing the biggest change in direction. Retailers reported that their property holdings increased in the past six months but they expect little change in the next. Very modest growth in property holdings by the leisure sector is expected to be followed by a sharp contraction over the coming half year, and falls in financial services and manufacturing are expected to intensify.


Firms were asked about the impact of the credit squeeze and the slowing economy and around 80% reported each was having an effect on their business. In the last survey, the impact from the credit squeeze was still contained largely to the financial services sector. Nevertheless, firms said even then that key effects of the credit squeeze were to be seen in impacts on property disposal and acquisition.

In the current survey, half of firms say surplus property is an issue. Around 50% of respondents have surplus property, with retail (66%), extraction, chemicals & utilities (90%), manufacturing (61%) and the leisure sector (64%) carrying a material amount.

Howard Cooke, Director at property consultants GVA Grimley said: "The trend of more firms planning to reduce their property holdings is accelerating, with a significant fall in demand expected over the coming six months.

"Most firms are now feeling at least some effect from the tighter lending conditions and the economic slowdown.

"Falling business activity and lower demand is likely to increase the property surpluses, which will only push up the cost of paying empty property rates."

Karen Dee, the CBI's Head of Infrastructure said: "Businesses are paying a billion pounds a year more due to the government's changes to empty property rate relief. Companies are facing up to a recession and need to reduce costs, so this could not have come at a worse time.

"The government should look at everything it can do to help businesses through these difficult times and reversing its recent decision on empty rate relief would be one good way of doing so."

(CD/JM)