Are Less Commercial Properties Being Developed?

Posted on 9 October, 2011 by MOVEHUT

With many firms struggling and the economic downturn showing no signs of receding, are certain industries struggling more than others? Movehut investigates which industries directly linked to commercial properties are feeling the strain more.

By June of this year, a total of 948businesses had gone into administration. This was an increase of 19 per cent from March 2011. Out of those 948 businesses that filed for bankruptcy, 117 of those were in the real-estate and construction sectors.

Factors affecting bankruptcy rates include:

  • Government cuts
  • rising energy prices
  • rising debts
  • available finance.

It is believed that small and medium sized commercial properties will struggle more than larger organisations in the next couple of months. Larger firms will be forced to cut their prices to gain contracts, forcing smaller firms to do the same. But it may not be financially viable for smaller firms to take such cuts, which could mean ending up in administration.

Nigel Shilton, real-estate industry partner for Deloitte expressed, “Rising energy prices and significant cuts to public and private sector building projects have brought a large amount of planned projects to a grinding halt. The next quarter is not going to bring any relief from the pressures.”

The UK construction industry almost grinded to a halt in September, as the level of new commercial properties being developed fell for the first time in 18 months.

Anthony Cork, Director at Wilkins Kennedy stated, “The government has slashed capital spending on infrastructure across the board in order to plug the deficit and that has pushed the construction sector into a double dip.”

“The question now is how quickly private sector construction work will be able to pick up the slack left by the public sector. So far, this has not happened,” Anthony added.

With more and more bankruptcies on the cards, what will this mean for the commercial property industry? It seems that the only developments that are remaining strong are commercial properties which house supermarkets.

Sainsbury’s recently caused an outcry when plans were approved to build a new store on the same road, within one mile of an already existing Sainsbury’s store. The commercial properties in Sheffield will also both trade for 24 hours a day. A spokesperson for the supermarket defined the development by stating, “As they serve such small and distinct areas, it is possible to operate more than one store in densely populated areas such as Ecclesall Road.”

But these developments will have a massive impact on small independent commercial properties that sell specific items only. But that is another issue which we will save for another blog.




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