Partnership working will lead to success
Recession calls for better use of property, something previously low on management agendas. Staunching tens of billions of pounds now in lost opportunities needs an expert touch, says Jennifer Welch.
THE shattering effect of the credit crunch and ensuing recession presents especially tough times for everyone who’s involved in property and construction.
Effects in the North East have been far-reaching, touching many of those companies listed, and indeed not listed, in this new Top 250.
Given the transformation already of the global economy during 2008 and the first part of 2009, the question now is: Are there any reasons for us to be more positive?
Earlier this year, indicators in the commercial sector began to move off historic lows. But the reality is that fundamentals in the occupier market continue to deteriorate as companies remain in consolidation mode.
Rents and value have fallen and the knock-on effect for companies is that this shows up as reduced income and asset values, which in turn has an impact on how much they can borrow.
In the first half of this year, the investment market continued to see declines in deal activity, although at the slowest pace since the onset of the downturn.
While it is still too soon to point to an end in price falls, RICS expects deal activity to pick up by the end of the year, certainly in the South of England with the North, as always, slightly behind.
Within the region, development has all but ceased because costs are exceeding value. Only companies that can themselves fund developments are going ahead, although health and education haven’t been as badly hit.
Going forward, there is a crucial role for RDAs and local authorities to share risk on future developments by investing in the enabling of infrastructure and driving the first part of the development.
Private sector investors must see a potential for profit but to really make this work, both public and private sectors need to work more closely with an understanding of each other’s needs through joint ventures, special purpose vehicles and local asset-backed vehicles.
Given the gloomy backdrop for the sector, and expectation of further rises in vacant space, RICS is disappointed that the Government failed to address the issue of empty property rates.
This is encouraging the demolition of perfectly good buildings, discouraging speculative development and could result in more far-reaching problems when the economy starts to pick up again.
It may be down to the Law of Unintended Consequences, but the recession has brought into focus the need for more efficient use of property.
Property management has been low on the boardroom agenda – costing UK businesses tens of billions of pounds in lost opportunities, according to one RICS report.
Property costs are one of UK Business’s biggest overheads and must be properly managed. To do that, companies need the help of a chartered surveyor.
Just as they use a solicitor and an accountant for their legal and financial matters, a good chartered surveyor can lower costs throughout the lifecycle of a property, at one end by negotiating a better rental agreement and at the other negotiating a dilapidations claim.
They can also help return on investment through advising on energy saving issues, which in itself has the benefit of reducing carbon emissions.
When you consider that more than 40% of UK carbon emissions come from buildings (although homes are the largest contributors at 27%) there is a lot to be gained at the micro and macro levels.
To end on a highlight, we saw a great deal of evidence pointing to the innovative ways that “green” measures and technology are being incorporated in new building projects during this year’s RICS North East Renaissance Awards – the region’s very own property Oscars.
The 2009 Awards drew a record entry which, I think, illustrates the battling spirit in the sector. The rest of 2009 and 2010 will present continuing challenges and RICS will be working alongside all property professionals to encourage growth in the region.
Jennifer Welch is operations director, RICS North
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