Increased demand for Commercial Property

Affordability Constraints

Increased demand for Commercial Property

According to a survey of 132 firms carried out by property advisers GVA Grimley and the CBI, demand for commercial property has been strong over the last six months. Some 21% of firms surveyed are saying they increased their property holdings, compared with 7% in the previous survey of six months ago.

Stuart Morley at GVA Grimley says: "Above trend growth in the UK economy, reflected in the rise in business output and employment seen in this survey, is pushing up demand for commercial property. If anything, the biggest concern is that there aren't enough suitable commercial properties to satisfy demand. This is particularly true for parts of London and the South East but the outlook nationally is upbeat for the commercial property sector. A slight slowing in the UK business output over the next six months, in line with the expected slowdown in the world economy, is not expected to hold back growth in demand for offices, shops and warehouse space."

Affordability Constraints

The latest annual analysis of the housing market covering every local authority area across Great Britain by Steve Wilcox of the Joseph Rowntree Foundation shows that house-price to household-income ratios for working households has now reached record levels.

The report shows that while lower interest rates softened the impact of higher house prices, mortgage cost to income ratios have reached 1990 peak levels. House price to household income ratios for younger working households exceeded five to one in 78 locations – over twice as many as in 2004. In 51 areas, over two in five younger working households can afford a social sector rent without housing benefit, but cannot afford to buy in the cheapest tenth of the housing market.

hile house price to income ratios are highest in London, access to home ownership is most problematic in the South West. The South East as a whole is almost as unaffordable as London and the South West, and there are unaffordable ‘hot spots’ in all UK regions. Overall, Scotland is the most affordable part of Great Britain. But even within the more affordable regions, there are local areas where affordability is far more acute; some of the least affordable areas in the country are now in the northern regions of England.