Civil Engineering Reference
In-Depth Information
Table 4.3
Factors affecting demand for social housing
The current price (rent) of social housing
The price level of other forms of tenure
Assessment of need
Availability of finance, such as income support and mortgages
Levels of government subsidy
Demand for Industrial and Commercial Buildings
We now consider the demand for a whole range of buildings, including offices,
factories, warehouses, hotels, garages, shops - in short, nearly all buildings except
houses. Industrial and commercial buildings are not required for their own sake,
but for the services they can provide. Consequently, demand for an industrial or
commercial building is based on factors related to the specific sector in which the
building will be used. Demand of this type is known as
derived demand
.
Derived demand implies that buildings are rented or purchased not because they
give satisfaction, but because they can be used to produce goods or services that can
be sold at a profit. This is different from the factors affecting the demand to buy a
house. Following the emergence of problems in the sub-prime mortgage element of
the US residential market towards the end of 2007, global business confidence was
significantly dented and the demand for industrial and commercial property in the
UK declined as a consequence during 2008 and 2009.
Investments in industrial and commercial building, therefore, depend on the
expectation that the buyers or renters - that is, businesses - will make profits in the
future. If business confidence is low, investment will not take place - even if there is
current demand for an increase in production or sales. The factors affecting demand
for industrial and commercial buildings are largely dependent on the state of the
economy, and business expectations concerning output and profit. In other words,
because demand is derived, it is dependent on many things other than price. Some
of the main factors of demand for this broad category of industrial and commercial
buildings are shown in
Table 4.4
.
Table 4.4
Factors affecting demand for industrial and commercial
buildings
Technological developments
Changes in taste or fashion
Expected levels of cost, including interest rates
The state of the economy and government policy
Business confidence
The age and condition of the existing premises
