Implications of the change in user preferences in the economic downturn on investment strategies

Abstract

Purpose

The current world economic climate is uncertain. The credit crunch has led to occupiers rethinking their strategic requirements, and, at the same time, they are fire fighting to keep their occupation costs at a level that will allow the companies to survive. This briefing note aims to look at the activity between landlords and tenants in the market to determine, indicatively, the changes that are happening due to the downturn.

Design/methodology/approach

The paper uses an indicative survey and market commentary.

Findings

In this market, more than any other, tenants are approaching landlords with the idea of renegotiating their rental liabilities. Landlords are considering each proposal on its merits and solutions are ranging from side agreements to not demand full payment, to surrender and renewals to provide a more even cash flow or outright surrenders with a reverse premium being paid.

Practical implications

This paper looks at the UK market and the nature of agreements being made with a background of such uncertainty. The booming investment market of the last few years has shielded the profession from the need to consider fully the role of proactive management. This paper argues that good relationship management and a foresight to negotiate to protect future cash flows means that, now more than ever, management surveyors can enhance and protect capital values.

Originality/value

This paper provides an insight into the confluence of requirements between landlords and tenants in a market driven by a lack of capital and access to borrowings on both sides.

Citation

French, N. and Salisbury Jones, L. (2010), "Implications of the change in user preferences in the economic downturn on investment strategies", Journal of Property Investment & Finance, Vol. 28 No. 6, pp. 466-474. https://doi.org/10.1108/14635781011080311