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The Economic and Social Role of the Property Industry |
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Commercial property plays two vital roles in the European economy - first, it is a factor of production as all businesses require accommodation in which to function and second, along with stocks and bonds, it performs as an asset class for investors. Commercial property makes a major contribution of some 10% to GDP in the form of the value it adds to businesses through the services it provides and the business that it provides directly for other industries such as construction. To this must be added those services in the banking and financial services sector which are property related. In this sector, some 10% of employees are in real estate related occupations. The commercial property industry adds value to business and commerce in a number of ways. It provides modern accommodation at market rents to those businesses which find it too costly or impossible to buy appropriate premises; a lease takes away all or much of the risk of being left with a large asset when it is no longer required; initial costs are lower as construction does not have to be funded; expert property management services are available freeing up valuable management time; scarce working capital is not tied up in the ownership of buildings, enabling it to be invested in plant and employees, both of which give considerably higher returns than investment in property; lastly, it takes away the considerable risk inherent in the construction of new property to meet anticipated market demands 2-3 years in the future. The property industry also plays a major role in the provision of residential accommodation in the form of private rented sector flats. It is also the prime supplier of new shopping facilities and a major contributor to new leisure/recreational activities and is one of the prime catalysts of regeneration and urban renewal in Europe's towns and cities. |