What can occupiers do to minimise commercial property risks, post-Brexit
Recent industry analysis from the RICS UK Commercial Property Market Survey shows a significant deterioration in market sentiment following the Brexit vote reporting, “The heightened sense of caution is visible across both investment and occupier sides of the market, with uncertainty pushing rental and capital value projections into negative territory.”
RICS are not alone in their forecasts of what will happen after the fall-out of the EU referendum with Great Portland Estates citing a slow-down in the commercial property market as investors become more hesitant.
Whilst some of the statistics may paint a gloomy picture, like all predictions there is of course a high element of uncertainty and speculation, especially with Brexit, where there is no precedent. The recent decision for the PM to trigger the UK’s formal departure from the EU next March has led to further market volatility with the devaluation of the pound and debates over future growth and investment.
One of the potential fall-outs of a decline in business confidence is that companies may stall decisions, especially when it comes to corporate real estate.
Keep calm and carry on
However, if it was possible to remove some of the uncertainty, then this would potentially liberate and encourage businesses to take advantage of commercial opportunities rather than wait. As John Hawksworth, chief economist at PwC, recently advised: “Businesses need to hold their nerve through this unsettled period, take stock of the potential impact of Brexit on their markets and operations, and make contingency plans for alternative outcomes.” This comment suggests that organisations should keep calm, but also acknowledges the need for a plan B.
So what if contingencies could be introduced to guard against risk or uncertainty? At the moment, making a capital expenditure for the purchase of a new property or signing a long lease is likely to be a commitment too far for many, but there are ways that businesses can push forward with their plans without being exposed.
Introducing cost certainty
Take an example of a company that had already ear-marked a property for a new site, pre-Brexit, but decides that investing now in an uncertain climate would be foolhardy. Do they stick or do they twist?
One way around the stalemate is to consider a property model that can enable the best of both worlds, letting an organisation have the property they desire and therefore realise their growth plans, whilst at the same time mitigate the risk.
Managed Office Solutions (MOS) has been designed to meet these exact challenges. Using an Opex costing model, MOS allows you the choice of a specific building at a specific location or a range of portfolio properties across the country. The property is fitted-out to your exact requirements including your own brand values. The contract is costed on an inclusive per workstations/month basis including any necessary refurbishment, furnishings, FM, utilities etc.
Typically the length of contracts are dramatically shorter than traditional leases (3-5 years) with a clean exit a term with no exit fees or dilapidations, or options for future use. The beauty of this arrangement is that a third-party takes all the risk, whilst you focus your resources on developing your business.
So whilst other economic variables are more difficult to foresee, there are no surprises when it comes to corporate real estate supplied by MOS.
Stealing a march on the competition
The ability to flex your operations is likely to be crucial over the coming months and years and as PCW has hinted once the post-referendum shock begins to fade, 2017 GDP predictions range from -1 percent to +1.5!, so you need to be in the best position to take advantage of market opportunities or contractions. If you want to steal a march on the competition, but without the gamble, then MOS could be a practical and cost-effective solution.
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