King Sturge is predicting a gloomy 2008 for occupiers and developers alike in its latest property predictions. The company is expecting a fall off in speculative development and upward pressure on rents/downward pressure on incentives, as yields move out and empty rates kick in-particularly for D&B schemes.
Looking at the empty rates scenario, the company said: “The return of empty rates liability on industrial property from April 2008 will also represent an additional burden on both occupiers and landlords. Occupiers looking to expand or consolidate operations will also be wary of the potential additional costs of exiting from their existing space. This will cause further delays and complications to the process.
“The costs of holding empty property, from a landlord’s perspective, will be increased and as such will be reflected in the rent and tenants incentives on offer.”
And the outlook for occupiers following the recent credit crunch doesn’t make good reading either. “If yields continue to move out, we anticipate that funds and developers may continue to put upward pressure on headline rents; reduce rent free incentives or hold out for longer term leases. The availability of five-year leases for new space may be put under pressure, but the return of empty rates might counteract this.”