Maintenance spending dives at fastest rate for 50 years

Spending on the repair and maintenance of commercial property has seen its sharpest fall for 50 years.

The decline threatens to further undermine the value of commercial buildings which have already fallen about 45% since their peak in 2007.

A survey from property consultant NB Real Estate found that expenditure on repair and maintenance has plunged by almost a quarter (22%) from its peak in Q4 2007, from £4.12bn to £3.2bn in Q2 2009.

NB Real Estate said that maintenance is generally the responsibility of the tenant but the impact of the recession has meant that maintenance work has been slipping down tenants’ list of priorities.

The firm warned that underinvestment in essential maintenance work can have a serious impact for landlords and could lead to large and unexpected repair bills, falls in asset values and, in some cases, legal liability where there have been breaches of health and safety legislation.

Bob Cooke, Director of Building Consultancy at NB Real Estate said: "The recession has already dealt two severe blows to the property investor - reduced asset values and lower yields.  Now it's about to follow up with a low punch: increased dilapidation costs.

"With the pressure on cash flow and the continuing reluctance of banks to lend, tenants are becoming less diligent with property maintenance. The cost of neglect can be substantial for landlords, who may struggle to let dilapidated properties once leases have expired.

"Landlords have already suffered huge losses from the recession but the lack of maintenance could impair assets values even further. As property owners become less able to secure lending to fund remedial work due to their weaker financial position, they are forced to delay repair work even more. This could add to property damages, driving costs further upwards in a vicious circle."