The economy, we keep on being told, is on the mend. A speech by chancellor George Osborne has talked about things “turning a corner”. The latest data on growth shows gross domestic product rose by 0.7 per cent in the second quarter, while the latest Markit/CIPS Purchasing managers Indexes show expansion across different sectors, some of which is the most positive since the 1990s.
However, the fact remains that there are many empty commercial properties in the UK, from unused office space to the everyday sight of vacant shop fronts, where once there were shelves laden with goods, tills, shoppers and staff. According to the latest figures from the Local Data Company’s (LDC), 14.1 per cent of shops are still empty.
Those investing for the future, however, can justifiably look at such under-used capacity as an obvious consequence of recession, one in which the UK economy shrank by 7.2 per cent between 2008 and 2009 -so great a fall that output is still below pre-crisis levels. On that basis, provided the recovery continues and gains pace, the closing of the output gap will mean space is filled and, thereafter, more will be needed when the UK economy finally becomes larger than it was in 2008.
The prospects may vary from place to place. The LDC data on shops, for example, revealed the vacancy rates were over 20 per cent in the north but less than ten per cent in London. They also showed smaller centres have fewer empty stores.
Could that point to a smaller, southern location like Swindon as a good place to invest? The Royal Institution of Chartered Surveyors Commercial Market Survey for the second quarter revealed that the overall level of floorspace available had dipped for the first time in six years, but only a little. However, Swindon-based survey contributor Andrew Kilpatrick of Kilpatrick & Co told Wiltshire Business Online the town’s prospects are among the better ones.
He stated: “At last there are tentative signs of improved activity and optimism in Swindon’s commercial property market, helped by the news of one of the biggest town centre office lettings since the recession, with 15,239 sq ft at Station Square being let to PrePay Solutions.
“In the retail sector, there is the prospect of Waitrose coming to Wichelstowe, M&S Simply Food to Mannington, Morrisons to Dorcan Way and Regent Circus, and an expansion of the Outlet Centre”.
This list may be a longer one in Swindon than in other towns, but the fact that investment is happening at all is positive. Writing about investment in property and commercial real estate, Daily Telegraph columnist Jeremy Warner said: “The financial crash has conditioned us to think of this as an undesirable, even dangerous, development. Yet the economy is not going to recover without it.”
In summary, therefore, it may be that some will feel a hesitancy about commercial property investment. However, by getting involved investors will be helping to drive the recovery themselves.
Moreover, such activity must be considered in context. If there were problems and losses in the past caused by excessive leveraging, poor regulation of the financial sector and errors borne out of sheer hubris – Alan Greenspan’s explanation for all crashes – the fact that those buying property now will be doing so with such events fresh in the memory. That means the near future could be the least likely time in which such mistakes will be repeated.