Relapse in business confidence to further retard office demand

29-09-2011

For now, no improvement in the demand for office space is detectable, with vacancy rates in general continuing to move sideways.

But, more discouraging for the demand and vacancy-rate outlook must be the current relapse in business confidence. After reaching a trough in the latter half of 2009 — and thereafter moving jaggedly north — business confidence has since the start of the year changed direction. Of course, uncertain economic conditions, both locally and abroad, might be the cause of the weak business confidence levels. Nonetheless, given the weak business confidence levels (only about 40% of the BER’s business confidence survey respondents are finding prevailing business conditions satisfactory); firms are likely to continue to think twice about expanding their premises or hiring new employees. The implications of this might be continued lacklustre demand for office space to rent.

The graph shows the robust tendency for business confidence and the growth in the demand for office space to move together over time. In light of what is happening in the world economy, don’t expect a miracle on the confidence front. This implies the demand for office space will remain in the doldrums for quite a while yet.