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Offices chief warns developers of wait for new build recovery

Regional commercial developers will have to rely on refurbishment work for some time, according to the new president of the British Council for Offices.

In an interview with Construction News, Gerald Kaye said commercial developers should focus on renovating the surplus of office space already built, rather than hold out hope of a new-build revival.

Mr Kaye, the former development director of property firm Helical Bar, said there was little indication that the tentative new-build recovery in London would extend to other parts of the UK.

He said: “If there is economic activity under way anywhere else in the world then London will benefit. Foreign money always finds its way to the capital.

“But the regions are much more vulnerable to UK market conditions - if it’s slow, the regions will suffer for it.”

Mr Kaye, who took the helm of the membership body last week, added: “There is a large surplus of office space in the cities outside of London. The main drive of demand is going to be through obsolescence.

“The refurbishment of rundown blocks that are no longer suitable for use is going to have to tide contractors over. It’s going to take a bit of time to work through what we have there already so it’s wise not to expect new-build work for quite a while.”

The national commercial recovery ground to a halt in June as public sector spending cuts began to squeeze the wider economy.

A report by property agent Savills revealed that almost 22 per cent of commercial developers signalled a drop in overall commercial activity in June, with only 19 per cent indicating a rise.

As a result, Savills’ Commercial Development Activity index showed a net balance of minus 2.8 per cent in June, the lowest reading in 11 months and down from a positive balance of 4.1 per cent in May.

Public sector commercial development fell at its fastest pace since January 2009.Savills head of building consultancy Michael Pillow said: “Publicsector austerity measures are now firmly impacting on the development market, with activity for public sector clients in double-dip territory.”

With public sector work already being substantially cut by the Government’s austerity drive - and housing schemes being abandoned weekly - a recovery in the commercial sector has been keenly sought by the industry.

But while there has been a surge of optimism in the London commercial sector this year, experts have warned that this hid a much gloomier national picture.

A Drivas Jonas Deloitte Birmingham Crane Survey last month showed that office ­development in England’s second city had continued to slow this year.

Just a single start on site was recorded this year - the 18,200 sq m scheme being constructed by Thomas Vale at Woodcock Street in Ashton.

Allan Wilen, economics director and head of market intelligence at business unit Glenigan, remained optimistic about the commercial recovery.

He said developers would begin to invest as the national economic picture became clearer.

“A lot of public sector work was put on hold during the election process and since then more projects have been axed. We’re seeing those delays start to come through now,” he said.

“I think a combination of political and economic uncertainty has caused private sector clients to hold back on large projects, but we should see these begin to rise now things are clearer.”