Property market set to fall

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The Independent Online
THE COMMERCIAL property market is set to suffer a slump in business confidence and will experience a marked slowdown in the next six months, the Confederation of British Industry warned yesterday.

The employers' body said developers would be affected as hard-pressed companies scale down property holdings in response to economic downturn.

"Companies are now less optimistic about the prospects for output, profitability and employment. This points to a significant risk that the property market may weaken in 1999," said Sudhir Junankar, CBI associate director of economic analysis.

A survey of 380 firms by the CBI and property advisers GVA Grimley found that companies' expectations over their output for the next six months sank to a four-year low in the second half of last year. Business optimism was also at rock bottom, with almost 60 per cent of firms saying they were more pessimistic on their prospects than six months ago. Manufacturers and financial services firms were most pessimistic, while construction and transport companies were most optimistic.

Stuart Morley, head of research at Grimley, said: "The economy is slowing quite rapidly. I expect that over the next six to 12 months property will weaken as the economic downturn feeds through." He said growth in rents was expected to slow in the first part of the year.

However, Mr Morley said the 1999 property slowdown would be much less pronounced than the late 1980s crash, when the market was squeezed by oversupply and waning demand. The survey found little excess supply.

The poor outlook contrasts with the market resilience of the past six months. The survey showed that commercial property demand held up well in 1998's second half. A balance of 7 per cent of companies (excluding utilities) reported greater property holdings in the period, compared with a slight fall six months earlier when most said they had cut holdings.