What, if any effect, will the terrible disaster that has befallen Japan have on the demand for commercial property and serviced offices in Britain and the rest of Europe? Firstly we need to look at the effects on the general economy.
It is still too early to tell what the full impact of the March 11 earthquake, tsunami, and growing nuclear crisis on Japan’s infrastructure, industrial base, and economic growth will be—let alone the broader global impacts. Nevertheless, past natural disasters and disruptive events (the Kobe earthquake of 1995, 9/11, and Hurricane Katrina in 2005) give us some idea of the likely economic effects (and timeline) of this horrific event. The economic impacts of these events are typically large for a quarter or two after the event, and are mostly concentrated in the region of the disaster. After about two quarters, however, growth is boosted by the reconstruction effort. At the national level, the impact on economic growth is usually noticeable but small (a few tenths of a percent). In the case of Japan’s most recent calamity, given the damage to the electricity power generation capacity, the impact on economic growth could be greater. The big uncertainty about this disaster (and what sets it apart from other such disasters) is that roughly 10% of electricity generation capacity (both nuclear and coal) may be offline for a few months, until oil- and gas-fired plants can ramp up. In the near term, this could have major negative ramifications for Japanese industrial sectors; some steel and automotive factories have already been closed.
The good news is that Japan has not been an engine of global or Asian growth for some time. This means the impact of much lower Japanese growth on the world economy probably will be limited and small. In fact; Disruptions in Japanese automotive and steel production may result in a boost in the demand for these products from other sources, including the rest of Asia, the United States, and Europe.
So we can conclude; although the disaster is un-quantifiable when it come to the cost of human suffering and heartache, in purely financial terms it will have no effect on the pricing or demand for either commercial property or serviced offices in the greater European economic area.
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