The news arrived on Tuesday, that Iceland (the country not the supermarket chain) has once again brought Europe to a standstill. Okay, perhaps that is a little over dramatic, but the fresh ash cloud is sure to have a knock on effect on the UK’s commercial property market.
The volcanic ash cloud is said to have disbursed from UK airspace, but is now disrupting European airspace and forecasters are predicting its return to Britain later this week.
In wake of the activity at Iceland’s Grimsvotn volcano, Europe has seen a large amount of disruption to flights. European air traffic controllers said they expect about 700 flights to be cancelled on the continent today, following over 500 cancellations on Tuesday.
It has been suggested that, should the ash cloud linger over Europe for a short period of time, the effects will only be minor. Simon Goodfellow, an equity strategist at Dutch bank ING, stated: ‘A couple of days disruption isn’t going to have a significant impact, but if it goes on for several weeks then it will be start to be material.’
However, it is understood that the confusion, in regards to delays, has led to a number of overseas investors cancelling business trips to the UK. Which in turn, delays investment into the commercial property market.
Another area where the ash cloud could affect commercial property is the air conditioning systems. It is possible, the ash could find its way in to the system and cause a blockage. If this was to occur, commercial property providers would see large maintenance invoices landing on the desks of their accounts departments.
Commercial property insurance is unlikely to cover any maintenance as a result of the ash cloud and the damage will be put down to ‘an act of God.’ As a result, we may well see commercial property owners increasing service charges. Therefore, the ash cloud will have had a direct effect on commercial property tenants.
So, hopefully the UK commercial property market will emerge unscathed from this week’s events. But one thing is for sure, the longer the confusion over the ash cloud continues, the more chance of a negative impact on the commercial property market. A clear and concise message from the aviation authorities is most definitely required.
