Commercial output is on the rise, but with London and the South-east continuing to prop up the market, how long will it take for confidence to spread and prompt appetite for office building in the regions?
Offices are expected to drive the commercial sector this year with double-digit growth, according to the Construction Products Association.
The Savills Commercial Development Activity report this week found that the UK experienced its 16th consecutive monthly increase in commercial activity last month.
So signs are good, and developers are pressing ahead with plans (see box), albeit primarily in the capital.
The sector will also look for progress on the stalled £1bn Pinnacle tower by Arab Investments as a bellwether for the industry’s prospects, with Brookfield Multiplex working on its development appraisal.
The usual contractors, such as Laing O’Rourke, Sir Robert McAlpine and Skanska, are expected to jostle for the bigger schemes, while Brookfield Multiplex, Mace and McLaren are also continuing to pick up work.
“The commercial sector expects to see new ideas and possibly a consultation from the government on its proposed minimum energy performance standards”
The decision by Google to go back to the drawing board on its £300m HQ at Argent’s King’s Cross development raised eyebrows but is expected to more than double its value under the new designs.
The work is likely to be divided up between several contractors including Bam Construct, which originally won the deal to build the proposed scheme.
Chinese investment in the sector hogged the headlines in 2013, but European developer HB Reavis demonstrated appetite for London commercial space still exists closer to home when it entered the UK market with plans to build its speculative 33 King William Street development in the City during the second half of the year.
“Policy to make it easier to convert office buildings into residential property has led to developments and uptake is expected to increase this year”
British Property Federation director of policy Ian Fletcher says the commercial sector expects to see new ideas and possibly a consultation from the government on its proposed minimum energy performance standards, which it plans to introduce in 2018.
The government could also draft a bill towards the end of the year to reform the right to light law, which gives landowners power to grant consent before buildings that block out light can be constructed – following a Law Commission consultation last year.
Policy to make it easier to convert office buildings into residential property, introduced in May 2013, has led to developments and uptake is expected to increase this year.
The government’s introduction of ‘Right to Contest’ offers developers the chance to challenge whether public sector-owned land can be put to better economic use, though the BPF said it expects residential rather than office developers to take advantage of the new system.
Five developers to watch:
Much of British Land’s pipeline is due to complete over the next year, including the Cheesegrater and 5 Broadgate. It has added the redevelopment of the Shoreditch Estate with the City of London to its pipeline and seen increased demand from fashion, homewares, food and leisure.
Development Securities has reacted to increased confidence in the market by saying it is pressing ahead with the 165,000 sq ft second phase office of its speculative office development at Hammersmith Grove.
Great Portland Estates says it will commit more than £340m to new schemes which will start within two years, including its £550m Rathbone Place scheme due to start this year, as well as at Broadwick Street and another at 73/89 Oxford Street.
Helical Bar will start offices at Old Street and Mitre Square, and is building Scottish Power offices in Glasgow. It is expected to appoint a contractor for its £470m Barts Square scheme near Smithfield Market in London.
Land Securities is likely to proceed with new offices at 1 New Street Square in London, with a final decision at the end of the month, and 20 Eastbourne Terrace. It is also seeking planning permission to redevelop Oxford’s Westgate Centre with The Crown Estate and the Ealing Filmworks.