30 September 2008
Huge challenges for commercial property market
The woes in the housing market sometimes hide the fact that there are currently huge challenges for developers and investors across all the sectors of the commercial property market as well – whether it is offices, retail, industrial or leisure. The downturn is severe with falling property values and rents, increasing yield expectations and limited investment. Where is all this likely to lead?
• Can we expect more misery?
• When will markets stabilise and settle?
• And what about future prospects?
What we’re seeing at the moment, as a result of the credit crunch, is a complete lack of confidence. Unless people have to commit to taking a new property or buying a home they are waiting until they’re confident prices and rents have stopped falling. Well I am a realist, and despite current conditions I’m in no doubt that when the current turmoil has passed there will be a significant need and demand for both commercial property and housing.
The importance of sustainability
However when things change we will be entering a new world so to speak – a world that is becoming more demanding as a result of the sustainability agenda. The more severe the weather conditions that are being experienced around the world the more people are aware of the effects of climate change with the result that sustainability will play an increasing part in the future of commercial property and housing.
Sustainability is as important to commercial property as it is to residential development. Some may regard it as an extra cost burden but they will have to accept it is an integral part of today’s agenda that needs to be accommodated. It is not a short-term issue either – it is long-term. Sustainability should be embraced and seen as a virtue and a benefit. After all the more sustainable a building is the more attractive it is to buyers and investors.
Housing developers are already experiencing what is required. We now have to meet the requirements of the Code for Sustainable Homes with all newly built homes needing zero carbon standards by 2016. In my company’s case we have been moving in this direction for a number of years through our involvement in particular at the Greenwich Millennium Village in London. It is going to be important to have more energy efficient buildings in the future. We also need to make increasing efforts to ensure our commercial buildings are more efficient and cheaper to run. It is positive to note the development of the Code for Sustainable Buildings and the Government’s ambition that all new non-domestic buildings be zero carbon from 2019.
More mixed-uses
We will also need to look into other issues such as the way people travel to work. Somehow we are going to have to reduce our reliance on the car regardless of the sustainability agenda as we’re experiencing ever increasing congestion and our roads will not be able to cope with rush hour demand. Perhaps by making more provision for public transport, cycling and walking we could reduce the dependence on the car that many sectors of commercial property currently rely on.
For example can we turn new business parks into mixed-use locations where people live and work in close proximity? Certainly all major commercial property schemes will have to include good public transport provision as a minimum.
In summary, I believe the long-term prospects for commercial property and housing developers are very good for those who can survive the effects of the credit crunch.
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