Downturn Forces Occupiers To Optimise Space Utilisation
9 Mar, 2009, London
"Consolidation and staff cutbacks will be major drivers affecting demand for space in the next twelve months as the downturn in the economy influences tenant behaviour and property is increasingly being used to lower costs." according to a new report from global real estate consultant, Cushman & Wakefield.
The results are revealed in Cushman & Wakefield’s latest European Landlord & Tenant Survey in which a total of 750 occupiers and landlords across Europe were surveyed.
Space utilisation to intensify
Over the past 12 months, 40% of tenants have seen their space utilisation intensify, and more than a third anticipate that it will be denser over the next year. The average floorspace per worker in Europe has fallen from 12.8 sq m to 12.4 sq m. Financial services occupiers are leading this trend, with more than half already having reduced their space per person over the last 12 months. TMT companies are most likely adjust floorspace per worker downwards in 2009.
The potential for more grey space coming onto the market has also risen with 70% of tenants believing they could occupy their existing space more efficiently whilst at the current time just under 30% expect to reduce the overall space they occupy over the next 12 months.
Landlords and tenants look to real estate to counteract impact of downturn.
Consolidation of occupancies is the most popular way of reducing property overheads in Southern Europe. Relocating to a cheaper location, whether in the same country or across borders has limited appeal in today’s marketplace for occupiers. The upheaval and upfront costs associated with relocating and curbs on capital expenditure within most companies mean that this is not a feasible option in cash starved times.
Effective rents are falling and according to the survey, are likely to drop further, with over half of landlords expecting to increase the incentives on offer to tenants while only 37% anticipate reducing headline rents. Landlords in Western Europe, especially in the UK are most likely to increase incentives with two thirds anticipating this course of action.
The slowdown in development is also re-enforced by the survey, with half of all developers expected to curb activity.
Eric Peeters, head of European business space at Cushman & Wakefield said: "It is indeed a challenging time for both landlords and occupiers. However, the lack of grade A space in many major cities and the current curb on construction activity, should ensure that the office markets are well placed to respond to an upturn in the global economic situation when it comes."
Sustainability issues remain firmly on the agenda despite the downturn
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