Office Landlords Face The Risk of Closure As They Contend With Difficult Market Conditions.

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Office Landlord

According to new independent research from infinitSpace, more than one in seven office landlords fear that their office buildings may close within the next five years due to affordability issues. The study also found that a quarter (25%) of landlords currently do not turn a profit from their office buildings, while a third (31%) are grappling with increasing debt repayments. Additionally, one in five (20%) lack confidence in their ability to settle debts secured against their commercial properties. Meanwhile, nearly half (48%) cite high inflation as a significant factor complicating the management of ongoing operational costs for their properties.

Some landlords have already taken action to mitigate the damage caused by the challenging economic climate. 17% have already or are planning to sell off office buildings to remain buoyant, while a fifth (20%) have been forced to make redundancies in the past two years.

Despite these challenges, many landlords expressed optimism for the future of the market, with half (50%) of respondents feeling confident in the financial performance of their office building portfolios over the next five years. Meanwhile, 61% believe office occupancy rates will increase over the same period of time.

The survey of 250 UK office landlords commissioned by workspace provider infinitSpace found that:

  • 14% say their office buildings are at risk of closing in the next five years due to affordability concerns.
  • 25% say their office buildings do not currently generate a profit.
  • 31% of landlords report struggling with rising debt repayments.
  • 20% are unsure if they will be able to afford to pay off the debt secured on their commercial properties.
  • 48% say high inflation has made their properties’ ongoing operational costs difficult to manage.

Wybo Wijnbergen, CEO of infinitSpace, commented: “Office landlords are facing a worrying array of financial challenges. The high cost of borrowing has put immense pressure on the industry, only compounded by high inflation, which has made operational costs difficult to manage. So, it’s no surprise that many feel uncertainty about the current state of affairs for their portfolios.

“The intent of sharing this research is not to fearmonger, but to raise awareness and highlight that, despite these challenges, hope is not lost. In fact, as many respondents seem to recognise, the office market has a bright future ahead. 

“We must remember that redundancies and closures may protect a portfolio in the short term, but they won’t address the root cause– landlords have plenty of other tools in their kit to futureproof their assets.

“A strategic, future-focused approach that taps into market demand is key. Looking into converting underutilised properties into other real estate types with the help of third-party providers can equip landlords to thrive in the rapidly evolving workspace landscape, helping them secure a more stable financial future.”

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