We frequently see Leaseholders challenge Landlords about the arrangement of Terrorism insurance on the property they occupy. Leaseholders often do not feel that they should meet the costs of the insurance, that the lease does not expressly provide for it, or that the risk is very small or non-existent given the location of the property.
However; the threat from terrorist acts is very real across the UK and is constantly evolving. The law is also clear in that 'if the lease provides for risks considered by the CML, or a reasonable discretion to insure such risks as the Landlord sees fit, Landlords can satisfy themselves that Terrorism Insurance is indeed recoverable expenditure' (Qdime Ltd v Bath Building Management Co Ltd & Ors).
International terrorist groups such as Al-Qaeda, Boko Haram and Daesh have increasingly targeted civilians; focusing upon crowded places, places of worship, commercial and residential locations plus critical national infrastructure.
2016 has seen a dramatic increase in 'inspired' terrorist attacks versus 'directed' terrorist attacks (official Europol figures show
These threats are incredibly difficult to detect, prevent and prepare for. The tragic event in Nice provides an example of how the terrorist threat has changed, where the principal loss was not damage to property but contingent business interruption such as denial of access and wider loss of attraction, particularly affecting tourism and leisure. It is estimated that the lockdown of Brussels for 5 days cost an estimated €51.7m per day.
Pool Re remains the default Terrorism Insurance option for most commercial property and business interruption insurance programmes. It is a UK sovereign backed insurance that includes cover for damage caused by a terrorist act involving the deployment of chemical, biological, radiological and nuclear (CBRN) means. With the return of fighters from warzones in Syria and Iraq, where chemical weapons are available and there is evidence that research has been conducted into enhancing the capability to of Improved Explosive Devices to carry radiological payloads, this is an emerging risk for the UK.
It is essential that property owners make provision for the economic impact of a terrorist attack, transferring the costs of this wherever possible by way of insurance. The take-up of Terrorism Insurance is worryingly low outside London with current estimates by Pool Re suggesting less than 10% of all small to medium size enterprises are arranging Terrorism Insurance, placing the UK's resilience to Terrorist attacks at significant risk.
Source: Quarterly Threat Report – August 2016 by Pool Re
Kent's commercial property market has evolved significantly over recent years reaching a critical mass that leaves it well placed to weather the uncertainty over the UK's future relationship with Europe, according to the Kent Property Market Report 2016.
Produced by Caxtons Chartered Surveyors, Kent County Council and Locate in Kent, the report was launched at the Mercure Maidstone Great Danes Hotel today (November 3).
It says that the result of the EU referendum has taken its toll on expectations for the performance of the UK-wide property market. But, the outlook in Kent and Medway remains positive due to three key factors:
• The county now has a significant concentration of high value industries, which is attractive to relocating business seeking space;
• The relative affordability of business space on offer in the county also provides it with a competitive edge over many other South East locations, particularly given the significant improvements in the transport infrastructure;
• The county will also remain a vital gateway to continental Europe regardless of the impact of Brexit.
The report states: "Kent's occupational market has seen continued activity with little evidence of the derailment of lettings, a reflection of its strengths.
"Significantly, the county has seen growing demand from high value industries such as the life sciences, creative and technology, as well as those in the finance and business sector.
"High quality affordable office stock and accessibility to London and European markets that surpasses most south east locations are key drivers."
The upturn in demand has been reflected in rents, with those at all the county's major business parks now exceeding pre-recession peaks. A number of the county's town centre office markets saw record rents achieved. Looking ahead key regeneration schemes are expected to drive further uplifts, as centres build their appeal to new businesses and residents.
The industrial and distribution sector saw a year of strong demand, with the average prime rent rising by nearly 7% and with greater demand from more technical sectors, which the report says bodes well for long-term performance.
Turning to the retail sector, the report finds average prime rents in key centres rising slightly ahead of inflation, with levels in Tunbridge Wells, Sevenoaks and Dartford ahead of their pre-recession peaks. The average high street vacancy rate has fallen, while the average Health Index score has risen. The improvement in many of the county's coastal towns is particularly noteable.
It states: "The county's retail sector will not be immune to economic uncertainty, although Kent's historic and coastal towns are well placed to benefit from the sudden sharp depreciation of sterling attracting more tourist spending."
Much needed residential development is taking place across the county, with the improved market attracting developers from elsewhere in the South East, the report says.
It concludes: "Our new relationship with Europe undoubtedly creates uncertainty over future business fortunes. Certainly, the recent upturn in business investment in the UK, which is so important to the commercial property market, may be threatened.
"However, Kent is well placed to attract activity as maturing business clusters sustain vibrancy, delivering a virtuous circle of demand and economic activity."
Echoing that theme, in 2015/16, Locate in Kent, the county's investment promotion agency, helped 46 companies to set up, move to or expand in Kent, creating 1,386 jobs and retaining 1,085.
"While the Brexit process is likely to cause uncertainty in the future, what this year's Kent Property Market Report shows is that Kent and Medway has a thriving and vibrant economy, which coupled with its connectivity to the Channel Ports, airports and London and the rest of the country, make it an attractive proposition to companies looking to set up or relocate their operations," said Paul Wookey, Chief Executive of Locate in Kent.
Chairman of Caxtons, Ron Roser, said that in its fourth year as main sponsors of and contributor to the Kent Property Market Report, the firm is delighted this year's research confirms Kent is well positioned to withstand the uncertainties presented by impending Brexit negotiations.
In addition, he said that they been able to develop the Caxtons' Prime Rent and Yield Series, which will now be published half yearly.
He said: "Kent has outstripped London with house price rises at 13% and there has been a substantial increase in prime industrial rents. Compared to other areas across the South East the cost of business space is still competitive, which is attractive to relocating businesses.
"Continued activity in Kent's occupational market, combined with demand from high value industries, office, business park and the industrial and distribution sectors all bodes well – but never forgetting the uncertainties that the UK in general faces.
"Kent high street vacancy rates have fallen, bucking the general trend. Certain Kentish towns have seen prime rents rises above pre-recession levels with coastal towns being some of the main beneficiaries.
"Last year's report highlighted the development of almost 27,000 new homes in Kent and this has now begun with marked activity on development sites across the county.
"In general, connectivity and sustained regeneration continues to benefit Kent. This year's report reflects the positivity across the property sector in the county and we are delighted and look forward to a very busy year ahead."
Kent County Council's Cabinet Member for Economic Development Mark Dance said: "The year ahead will undoubtedly be challenging and there remain uncertainties, particularly with major elections in the USA, France and Germany.
"But this report shows us that, with substantial planned investment and developments, Kent and Medway offers some of the most exciting economic growth prospects in the South East.
"Kent remains an increasingly favourable business location, given the impact of rising prices in London and other parts of the South East, and the help and support KCC offers to business.
"Our location, despite the unknown effects of Brexit, will remain a vital gateway to continental Europe and the county an attractive place for both domestic and international business."
Launch team: (l to r) David Fitzsimmons, Chairman of Locate in Kent; Ron Roser, Chairman of Caxtons; Cllr Mark Dance of Kent County Council; guest speaker and Editor of Property Week, Liz Hamson; and Mark Coxon and David Gurton, both Directors of Caxtons
Caxtons has researched and compiled information for the Kent Property Market Report, and publishes the information in tandem with Kent County Council and Locate in Kent.
During the last recession, the Kent commercial property market, in particular, was seriously affected, with values dropping in some areas by as much as 40%.
The market began to recover in early 2014 and into 2015, with gradual, modest increases in rents and capital values in major property sectors; particularly within larger towns. Investment properties became particularly attractive, with many investors who had been priced out of London, regarding Kent values and returns as attractive prospects.
However, investor interest became noticeably more cautious in early 2016 and was put down to the prospect of the then looming EU referendum. On the other hand, the majority of the market continued as it had been since 2014; confidence was high and transactions continued. Then the UK voted to 'Brexit' the EU.
Now, daily articles inform on the impact of this decision and the potential outcomes. Businesses and correspondents differ in their opinion with some convinced that a recession is on the horizon, and others are quick to promote any positive aspects of Brexit.
Three BBC business news stories, all published during the dying days of July, illustrate this divergence.
The first is a report on the latest Office for National Statistics (ONS) figures showing that the UK second-quarter gross domestic product grew faster than expected – up to 0.6%, from 0.4% in the previous quarter.
The second documents how GlaxoSmithKline has announced it is to invest £275m to expand its UK manufacturing sites (http://www.bbc.co.uk/news/business-36901027), whilst the third recounts residential estate agency firm Foxtons has reported a 42% reduction in profits (http://www.bbc.co.uk/news/business-36922496).
In the immediate aftermath of the vote there was market turbulence, but in the last month transactions have continued and new instructions are being to be brought to the market.
Banks may reflect the uncertain post-Brexit mood in their lending, and some businesses could postpone decisions on expansion, investment and new premises.
One thing is for sure, that market sentiment has been affected by this uncertainty. However, it is easy to confuse other factors as being related to the Brexit decision. For example, the changes in Stamp Duty and Land Tax announced in the budget and introduced in April saw a rush for transactions to complete before the changes were implemented. This will have been reflected in the following quarters' figures.
It is still too early to judge the economic impact of the UK's decision to abandon its membership of the European Union and it would be easy to talk the country into a recession. But it is important to ask what we actually want.
Once Article 50 has been activated and negotiations between the EU and the UK commence, an eventual agreement for our future relationship with the EU will emerge. Thereafter, the market will be in a much better place to declare its considered reaction to this monumental decision.
However, there is no need for an immediate or knee-jerk reaction. Ashford is proceeding with a number of key development opportunities including leisure, commercial, residential and educational schemes; Ebbsfleet Garden City is progressing and permission has been granted for 154 new homes and a new 420-pupil primary school in Castle Hill, work is already under way on more than 470 homes and there is discussion on a commercial development around the station; and funding has been committed and a contractor appointed to deliver the St James 156,915 sq ft retail and leisure scheme in Dover.
So, for now, there is plenty to celebrate in the local market.