MARKET uncertainty has not only resulted in speculative development coming to a virtual standstill, but it has also had a knock-on effect in occupational markets.
Many companies choose to stay in their existing premises rather than incur the additional costs and associated risks with relocating.
Occupiers, however, need to keep a close eye on market movements to ensure they achieve the best value and minimise costs on possible future plans to relocate.
Monitoring the demand supply equation for space is equally as important for occupiers as it is for developers.
For occupiers looking to relocate their business timing is as critical as it is for property developers deciding when to commence speculative development.
Available choice, quality of accommodation and movement in rental values and incentives must be factored in.
Already, for example, there is a bounce-back in the office market in central London, with future potential shortages and predicted increases in rents over the next 12-18 months of around 40-50%.
This means that, where speculative development has not occurred in the regions, similar market dynamics will apply.
It is totally understandable that organisations have deferred moving as a result of a general downturn in the economy.
That said, we are now fast approaching a tipping point where companies should be thinking how long this decision can be deferred before the options on the table become fewer and fewer.
This can result in compromises in both quality and location of buildings. Favourable tenant-friendly deals can still be negotiated with a sizeable number of rent-free periods and other incentives, which can encourage occupiers to relocate.
Companies with critical lease dates such as break clauses and leases expiring in the next 12 to 18 months should very carefully consider the demand and supply equation for space within their area.
They need to read and predict the market correctly to avoid compromises, and ensure favourable terms can be negotiated on any potential future relocation.