Viewpoint: Corporate occupiers remain in a strong position despite a mixed economic outlook
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As debate continues as to the strength of the economic recovery from the global recession, businesses and experts are conveying a mixed outlook. However, all agreed on one thing: that the unprecedented nature of this recession – its globalism, depth and speed - meant that we were in unchartered waters when assessing and pin-pointing an exit from the downturn.
On the positive front, the International Monetary Fund (IMF) in its World Economic Outlook – October 2009 – Sustaining the Recovery, published its forecast for growth in global economic activity in 2010 as three percent, on the back of a one percent contraction in 2009.
The IPD index for August 2009 also revealed a growth of 0.16 percent in commercial property values, the first since June 2007. As a result investment advisers are again tentatively favouring commercial property as an asset class. Respected firms such as Hargreaves Lansdown have recommended a tip-toe return to the market, with commercial property yields providing more attractive returns - at seven to eight percent - than traditional savings at less than one percent.
As interest in the commercial property market slowly emerges many have a lower appetite for risk, focusing on long-term, secure income provided by the likes of properties let on long leases with corporate occupiers or the public sector.
However, these positive outlooks were punctuated with warnings against over-excitement on recovery and further bad news on the employment front. The loudest were those highlighting the risk of a ‘double-dip’ recession.
IMF’s Managing Director, Dominique Strauss-Kahn, argued on the BBC’s World Debate on Sunday that such a probability was small, provided the world’s governments maintained a well-planned exit strategy from their unprecedented policies of large fiscal stimulus and extensive interest rate cuts. Ceasing the cash injections too quickly would undo all the good that such united and swift economic policies achieved, he said.
On the more bearish front global businesses, HSBC and General Electric, warned that a double-dip recession was a distinct possibility and both companies were planning for such an outcome.
On the employment front it was bad news for the UK, US and Europe, hitting long term highs as the ‘real economy’ continues to feel the pain of the recession. In August the UK Office of National Statistics published unemployment figures for the three months to June 2009 at 7.8 percent, the highest figure since 1995. Meanwhile, the IMF forecast UK unemployment to rise to 10 percent in 2010.
Economists and politicians agree that we are in unchartered waters. The weakening economic might of the US and continued growth in China and India has altered all historical assumptions on economic recovery. However, most this week backed the prospect that growth has returned and that it must be carefully managed to ensure it is maintained at sustainable levels over the long term.
Despite the ongoing debate on economic recovery, if you are a corporate occupier it is clear that there could be no better time than the present to secure competitive leases and incentives on prime commercial property.
For further information, please contact:
Guy Gregory
Operations Director, Head of Transactional
020 7198 2000
References: International Monetary Fund, IPD, Office of National Statistics, BBC World News: The World Debate, The Financial Times, The Daily Telegraph, The Times, Estates Gazette, Property Week.
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