Latest Irwin Mitchell Business Occupiers Survey

Over three quarters (76%) of businesses surveyed by law firm Irwin Mitchell think that if Britain exited from the European Union, it would be detrimental to their businesses, with over 23% saying it would be a disaster. This is one of the findings of the third Business Occupier survey, produced by the real estate team at national law firm  Irwin Mitchell.
 
The survey which canvassed  senior decision makers at over 250 companies across the UK also asked their views on other UK Government policies and found that over 41% of businesses felt that regional devolution should be a key Government priority in the next 12 months, with 28% asking to get the Northern Powerhouse initiative up and running. There were also calls to improve the connectivity between regional cities, (36% of the vote) which currently is neither direct or particularly efficient and for the construction of a  new or an upgraded railway system.  This confirms latest findings from the Irwin Mitchell/Cebr UK Powerhouse report that forecast that the gap between London and the UK’s regions has increased over the past five years and looks likely to continue to grow unless action is taken.*
 
Indeed the vote for London remains strong. When asked which region in the UK was most attractive to businesses thinking of expanding or relocating,  nearly 41% of respondents stated London followed closely by the Midlands with nearly 36% of the vote, perhaps reflecting the boost in confidence in that region following HSBC’s announcement it will relocate its head office for its retail banking arm to Birmingham; and by the progression of HS2. This is in marked contrast to the North West and North East where no businesses or professional services providers said they planned to expand their space requirements. If this is the case the Government may have a hard job on its hands if it wants to push through its Northern Powerhouse initiative with current policies in place.
 
In London, the City, with over 47% of the vote, remained the top sought after location for business occupiers, an increase on six months ago, followed by the M25 belt, where  24% of respondents said that the area becoming known as the” Doughnut” was increasingly attractive. The South Bank  with 10.5% came third reflecting the residential development across Southwark and Elephant and Castle. The West End, perhaps due to high costs and affordability was still lower down the table than the City and other expanding areas. Maybe more notable was the preference by UK businesses generally to be in city centre space (just under 38%), or failing that space near strategic transport hubs ( 24.5%) reflecting the success of new development at King’s Cross and Paddington Basin in London, or New Street Station in Birmingham. Accessibility for employees seems to be an increasingly important factor for businesses so that they can recruit and retain the best people. Out of town business space came third. 
 
The survey  also canvassed attitudes to the UK economy and revealed a certain cautious confidence among businesses. 48% of businesses think rents will rise in the next 12 months, but slightly more, 49%, think they will stay the same. This contrasts with 6 months ago when 70% of those surveyed thought rents would rise, indicating that most people think rents are reaching a plateau with maybe a little further to go. Less than 3% of those canvassed thought rents would go down. The tight market is also reflected in a hardening of attitudes to landlords where 40% of occupiers think landlords are becoming complacent to their tenants particularly by increasing service charges without justification.
 
UK business’s cautious optimism is also shown by the fact  over 81%  of respondents said they intend to stay in the same space in the next 12 months and nearly 15% said they plan to expand or relocate but  less than 4% plan to reduce their space requirements. However over half of those who intend to stay in their current space said they would look at reconfiguring their offices, followed by 27% who said they would consider hot desking and flexible working patterns. The current trend therefore seems to be for office occupiers to try and maximise space efficiency in their existing offices rather than relocating, perhaps reflecting the costs and upheavals of taking on new space. Despite this pressure on space, no one said they planned to reduce communal space, with over 11% saying they actually plan to increase it. New flexible working practices and the advice of workplace consultants seems to be making an impact on space planning.
 
One area that business occupiers were split was over communications networks and fibre optics with 52% saying the UK was not behind the curve, but 48% saying that we are. Most significantly of those who said they thought the UK was behind the curve all of them said this was detrimental to their businesses.

Paul Firth, National Head of Real Estate said, “ Our survey shows that business occupiers’ attitudes to their property appears to continue to be positive, but although most believe rents are stabilising or at least plateauing rather than going down, there is no strong move to push into new premises just yet.  Most companies seem keen to make the most of existing space, using it to full advantage.

“However businesses seem more aware of the north/south divide than previously with a strong call for regional devolution, supporting the Northern Powerhouse, improving connectivity between regional cities and for new and upgraded infrastructure, particularly railway links. It will be good to see if the Government implements these demands.”

Rob Thompson, London Head of Real Estate continued, "Confidence in London and the City in particular remains high, which is also evidenced by Irwin Mitchell/Cebr’s recent UK Powerhouse Report even if the Midlands seems hot on its heels. But much of the current confidence in UK plc is based on Britain staying in the European Union. It will be interesting to see if the Government gets its  “In” campaign across to the UK voter as we move in 2016, and if not, what impact this will have on our business sentiment findings going forward.”

For full results of the third Irwin Mitchell Survey of Business Occupiers, click here.