Similarly, although the vast majority of those canvassed - 87% - said they plan to stay in the same premises in the next twelve months, over 13% said they plan to relocate or take on more space. The fact that none of the companies surveyed currently plan to reduce their space requirement shows that a general confidence in the economy remains.
These figures could also be interpreted to show that businesses are staying in the same space because of the lack of supply of alternative space and because we are seeing a trend of business occupiers using their existing space in a more intelligent way to maximise its use in a period of rental inflation.
Businesses were also asked their views on business rate reform and although over 50% were not sure if this would make a difference, over 30% of businesses did say this would have a favourable impact on their businesses reflecting the BPF's stance to use this "once in a generation opportunity" to address the issue.
The Second Survey of Office Occupiers by Irwin Mitchell, also canvassed businesses’ opinion about the regions in the UK that they saw as most attractive for their businesses. London steamed ahead at 55.2% of the vote , followed by the South East generally (12.9%). Similar to six months ago the next two most popular places were the Midlands and the North East but the South West came out as one of the least attractive places for businesses to with only 4% of the vote. We added Scotland and Wales into the survey for the first time and both came above the South West. Only 5 businesses said they would look at going abroad but there was no consistency where.
Irwin Mitchell also asked those businesses who had voted for London as to where in the capital was most attractive. The City was cited as by far the most popular gaining 46% of the vote followed by the London suburbs (over 16%) indicating that companies are increasingly needing to consider looking out of Central London to run their businesses. Not surprisingly the South Bank and City Fringes (Old Street/Kings Cross and Shoreditch ) also scored well, in fact, higher than Canary Wharf. These areas are receiving big makeovers at the moment with large investment into residential schemes as well as input into commercial development. The West End scored the lowest, maybe reflecting that for many businesses it has become unaffordable. Top rents are now well over £100 psf. and there is a real shortage of stock coming on to the market.
Businesses were also asked what type of space they would most be interested in and in line with the vote for London, gave “affordable” London space over 50% of the vote. This was followed by regional city centres (22.6%) and out of town business parks (16.3)%. However 10% said a high profile London building would be of interest to them - perhaps reflecting the increased media exposure developments like the Shard, Gherkin and Cheesegrater have received.
The survey also revealed current attitudes to landlords. Despite it being a landlord's market, over 75% of those surveyed said they considered landlords do offer sufficient flexibility to occupiers, echoing our results of six months ago and only 25% saying they did not. Of those who wanted greater flexibility from their landlords the issues they most wanted addressing were: introducing monthly rent payments, rolling break clauses and shorter lease terms. At Irwin Mitchell we believe landlords will be more open minded about monthly rents and shorter lease terms, but rolling break clauses or unconditional breaks would be a hard sell given their impact upon market value.
Finally, following on from the Election we asked what emphasis the new Conservative Government should put on key business issues. 62% of those canvassed made alleviating the housing shortage a top priority, with 56% citing tackling Business Rates reform. 44% said improving infrastructure and transport should also be a top priority and 42% put tackling environment and climate change into this bracket also. Interestingly introducing the Mansion Tax was seen as the least of the top priorities with more people giving it a lower priority rating than any other. 30% of our survey also felt tackling the North/South divide was key.
Paul Firth, National Head of Real Estate at Irwin Mitchell, said: “Our survey shows confidence in the property markets, and as demand looks set to outstrip supply, rental growth looks set to continue. More and more businesses are therefore taking the decision not to move and to use existing space more efficiently. Companies are squeezing everything out of the space they have from buying smaller desks to reducing the size of meeting rooms."
Rob Thompson, London Real Estate Head continued: “Our survey also shows that despite rents being forecasted to rise, support for London has not diminished, particularly in the City and its fringes. But as the new schemes on the South Bank and Elephant and Castle and similarly in Kings Cross/Old Street reach fruition we are going to see a very different London from the one of five years ago."