There is no doubt that the economic future is looking far from rosy. In fact, two of the UK’s biggest commercial property companies have given new warnings about the strength of the economy and reported that business demand for new commercial space remains fragile.
Segro, the warehouse owner, said its vacancy rate increased from, 12pc, to 12.1pc in the three months to 31st March 2011. With London and the South East ‘resilient’, the rest of the UK is suffering from ‘more challenging economic conditions’.
Meanwhile, Hammerson, whose portfolio includes the Bullring shopping centre in Birmingham, said consumer spending in its centres had been impacted by government austerity measures and above-target inflation.
Its occupancy rate slipped from 97.3pc to 96.7pc. Although chief executive, David Atkins, said Hammerson is benefiting from its focus on ‘regionally dominant shopping centres and convenient retail parks.’
Like-for-like sales at its centres in the UK have risen by 1.5pc in the first quarter of 2011 and Hammerson secured 48 new rental deals, including Jaeger at Brent Cross and Primark at Queensgate, Peterborough.
Alan Carter, property analyst at Evolution, said: ‘Whichever way you cut it, the retail market is tough, but there is no doubt that quality retail assets perform at their best, the tougher the market is. Retaining occupancy is probably more important than trying to grow rental values this year.’
David Sleath, who took over from Ian Coull, as chief executive at Segro, during Thursday’s annual general meeting, said: ‘Occupier market conditions continue to be challenging as issues such as sovereign debt worries, the austerity measures in the UK and rising energy prices impact sentiment with many customers remaining focused on cost control and the consolidation of their space requirements.’
Sentiments like this, combined with new fears about a double dip economy, are bound to have a negative effect on property figures over the next few months. So, once again, there is a possibility you may have to get ready to weather the storm.
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