Demand Drops across East Midlands
Tenant demand in the East Midlands has fallen at the fastest pace for over six years with rental confidence falling at the fastest pace for a decade, says RICS’ Commercial Property Survey.
In Q1 30% of Chartered Surveyors reported a fall in demand compared to only 15% in Q4 2007. The commercial, office and retail sectors all reported a fall for the second consecutive quarter with the retail sector showing the largest decline at 40$ (compared to 27% in Q4). The continuing credit turmoil and a slowing housing market seem to be weighing heavily upon both retailers and consumers confidence.
New occupier enquiries also fall for the second consecutive month showing that current financial instability has impacted upon decision making in the business community with many re-evaluating their demand for commercial property space. Unsurprisingly, the office sector has been the worst hit area. 35% of Chartered Surveyors reported a fall in new enquiries for offices compared to only 13% in Q4.
Looking forward, surveyors continue to be pessimistic. Confidence in activity fell across all sectors with confidence in retail activity falling to the lowest level on record. In addition, it is expected that rents will fall in both the office and industrial sectors while rents in the retail market are expected to decline twice as much during the coming quarter.
Commenting, Simon Rubinsohn, RICS chief economist said: “The drop in tenant demand is a particularly worrying development. This raises the possibility that rental growth will continue to weaken as the level of inducements is raised in a bid to keep property occupied.
The underlying softness in the market will not have been helped by the ending of the tax relief granted for empty property. However while commercial property is likely to remain under some pressure for a while to come, from an investment standpoint yields are now approaching levels where they are beginning to offer some value.”
East Midlands-based chartered surveyor and RICS member, Andy hey, said: “The great pity in all of this is the lemming-like rush away by the lending banks that have currently turned into the non-lending banks. The business sector unfortunately relies on the banks and the latter are disappointing a lot of customers just now.
Difficult to forecast improvement until the banks actually settle their nerves and welcome their customers back. We believe there is business to be done and people are not as nervous as the survey suggests – it is simply the inability to obtain loans on reasonable terms that has brought us to this position.”
Click here to download the RICS Q1 Commercial Property Survey (PDF file 161k)

Rating Update
We may be half way through the 2005 Rating Revaluation says Underwoods, and whilst reductions have generally been harder to achieve there have been some spectacular savings for clients – and it still remains possible for businesses to make savings.
Andrew Boulter, a partner and head of rating at Underwoods, says: “Significant reductions have been achieved on a variety of properties despite the efforts of the Valuation office to get it right first time.”
He adds: “Inaccurate and incomplete information has made the VO’s analysis of rental evidence difficult. Moreover, the current rateable values are based on the rental values of properties as at 1 April 2003 and this was a period where a large number of incentivised deals were agreed, further confusing the market evidence.”
The removal of the strict time restrictions imposed under the previous regime allows an appeal to be made on any day during the five-year life of the List – and research by Underwoods has shown that there are still a considerable number of businesses in the county which have not appealed. Any savings can go back to 1 April 2005 – the start date of the 2005 Rating List.
There can also be further opportunities for reductions in Rateable Values for changes in circumstances surrounding the property. Nearby building works, demolitions and roadworks are often opportunities for temporary reductions for the duration of the problem, although these generally must last four of five months to become significant in rating terms.
Whilst the 2010 Revaluation may seem a long way off, Underwoods is issuing an early warning to businesses that it is also very important to be looking ahead now as the valuation date for this is April 2008 – which is virtually just around the corner. This makes the completion of the Valuation officer’s Grey/Blue rent return forms vitally important and it is recommended that businesses send the forms straight to their agents for completion.
Underwoods also reminds small businesses that they may have qualified for relief but failed to apply. Occupiers trading from a single property with a rateable value up to £9,999 are entitled to claim small business rates relief, which could have the effect of significantly reducing their rates bill. However this has to be applied for – it is not automatically deducted from any rates bill.
A business with a rateable value of less than £5,000 is eligible for the relief, which will provide a 50% reduction in their rates bill. The relief then decreases on a slidng scale of 1% for every £100 of rateable value over £5,000 to a maximum of £9,999. The tax relief also extends to small businesses with additional properties, where individual rateable values do not exceed £2,200 and the combined rateable value of all properties is under £15,000.

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