UK firms highlight property as a key business asset

Nine out of ten corporate occupiers across the UK regard their property portfolio as an asset that adds value to their business, despite the perception that firms increasingly view commercial property as a liability - according to a new survey by the CBI and property advisers GVA Grimley.

In a survey covering private companies across all sectors of the economy and across all UK regions, respondents were questioned on their attitudes towards the property they occupy. Whereas only 10 per cent of firms see property solely as a liability, 51 per cent consider it principally an asset and 39 per cent view it as both - meaning 90 per cent believe it can be an asset.

While these findings clearly demonstrate the value corporate occupiers place on their property portfolios, the pressure on property costs remain. Over a third (37%) thought pressure to reduce property costs had increased, while only 3 per cent reported it had lessened.

Howard Cooke, Partner at GVA Grimley said: “At a time when commercial property is perceived as a liability and corporates are looking to reduce their portfolios, it is perhaps surprising that such a large majority regard their operational property as an asset. Occupiers clearly understand the value their property holdings add to their business.”

He continued: “The main message from this research is clear: UK business regards property as a business asset, but its cost remains a major focus.”

The survey also found that sixty per cent of decision-makers were unaware of whether they complied with accounting standards dealing with surplus property and leases (FRS12 / IAS37)1. To comply, an assessment of property surpluses must take place every year, yet of those saying they did assess this liability, 6 per cent said they did so only every two years, 8 per cent every five years and 21 per cent at some other frequency. This means even of the 40 per cent firms saying they comply, only about two-thirds properly account for surplus property liabilities which, according to previous research2, exceed £9 billion for FTSE 100 companies alone.

The standards exist to give investors in a company a clearer picture of its liabilities. If firms do not properly account for surplus property they could be asked to restate their accounts, company directors can face fines under the Companies Act and listed companies will be in breach of stock market legislation.

Asked about lease flexibility, 62 per cent of firms say they would terminate up to a quarter of the space they lease and 9 per cent state they would wish to terminate more than a quarter of the space they occupy. Under a third (30%) said that they would not terminate any of their leases if it were an option.

Karen Dee, the CBI’s Head of Infrastructure said: “Businesses need to be flexible in order to compete in an increasingly global marketplace. Faster and more frequent changes to business practices often result in a build-up of surplus property, which needs to be monitored and assessed. Managing an efficient property portfolio can make a real difference to a business’s competitiveness.”

Eighty per cent use at least one measure to assess the performance of their property portfolios. The four primary measures identified were total occupancy cost (60%), cost per square foot (54%), ratio of property costs against turnover (38%) and space occupied per employee (29%).