The Credit Crunch Downturn is Affecting the Commercial Property Sector

The commercial properties market is experiencing an international economic slowdown, marking the end of a fourteen year boom. The number of available commercial properties for sale and for lease is at an all time high (unlike conventional homes for sale) due to the fact that occupier demand and new occupier enquiries for commercial real estate has declined at one of the fastest paces seen in the commercial buildings industry since the 1990’s.

The commercial real estate market is becoming increasingly tenant driven and if you are currently looking into commercial properties for lease or for sale there are great deals to be had, especially in central London. In order to try to counteract the declining demand for commercial property landlords are also offering high value inducements and incentives to tenants in order to try to secure illusive new lettings. Tenants are finding that their demands are being met at all levels and that they have a greater bargaining power being able to push lease lengths down at one of the fastest rates ever recorded and acquire some real commercial property bargains. For the first time in a long time the commercial property market is being tenant driven and the majority of tenants are taking full advantage of their newly found and ever increasing buyer power.

As with any kind of market change whether good or bad some companies are therefore actually benefiting from the credit crunch’s effect on the commercial properties market. Decreased rents, increased inducements and better lease terms all mean that in some cases businesses are being able to take out prestigious commercial property leases that previously would have been inaccessible to them.

Of course the downturn is not be taken lightly and many companies with lease agreements already in place are planning to reduce their commercial property lettings spaces in a desperate attempt to free up some much needed cash flow. Lengthy lease agreements mean that this often isn’t a readily available option but those with tenant break clauses in place are thankful for their foresight and careful planning. The companies most affected are not surprisingly part of the industries that have been most disturbed by the credit crunch as a whole and include those in the retail, leisure, financial services and manufacturing sectors.

Investment property is losing its appeal rapidly so landlords are going to have to continue to come up with new ways of making their commercial real estate more attractive in order to decrease the amount of commercial properties for sale and for rent that are currently available. Despite the current market unrest some companies still view commercial property as a good long term investment and are sitting tight whilst they weather the effect the credit crunch storm has had on the real estate and commercial properties industry.



Sell and Rent Back