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  5. > Commercial Office Construction Market Report – UK 2015-2019 Analysis

Commercial Office Construction Market Report – UK 2015-2019 Analysis

  • April 2015
  • -
  • AMA Research
  • -
  • 78 pages

Summary

Table of Contents

AMA Research have published the 4th edition of the report 'Commercial Office Construction Market Report – UK 2015-2019 Analysis', which provides a comprehensive review of the office construction and property market.

Key areas covered:

• Review of the UK commercial offices market - take-up rates, occupier category shares, market supply and demand, rental values, significant business parks.


• Office construction activity - new build office construction output and forecasts to 2019, contractor activity, significant end-use sectors and key trends.


• Regional analysis - regional office market performance and office development pipeline data for key UK cities; Central London, Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle-upon-Tyne and Nottingham.


• Key factors influencing office construction - planning issues, Local Enterprise Partnerships, conversion of offices, sustainability and 'green offices', construction costs etc.


• Key players in the offices sector - contractors, developers and architects/consultants.


Office construction has experienced a good recovery in the last 2 years and the report focuses on renewed growth in the sector over the last 18 months, which has resulted in a resumption of speculative development across London and many regional cities.



Key areas of insight include:

• Total take-up for 2014 was estimated to be the highest since 2007, highlighting a return to growth for the office market as a whole.


• Continued shortage of office space is likely to drive continued opportunities over the next 3-4 years for high quality refurbishment projects.


• Impact of Permitted Development Rights has resulted in an increase in proposals for conversion of secondary office buildings to uses such as residential, hotel or student accommodation - major impact on availability of second-hand space.


• Financial services and banking sectors have seen a recent resurgence and increase in demand for space after being the worst affected sectors during the economic downturn. The TMT sector is also driving growth in both the regional and central London markets.


• Regional development pipeline in many cities is now more positive with around 6.9m sq. ft. of speculative space to be completed by 2018 - double the annual average supply since the downturn in 2010.


• The outlook over the next 4 years to 2019 remains buoyant for the commercial office market.


Some of the companies included:

Balfour Beatty, BAM Construct UK, Byrne Group, Como Interiors, Ellmer, Galliford Try, Hammerson, Havelock Europa, Ibex Interiors, Interserve, ISG, Kier, MITIE, Morgan Sindall, Morris & Spottiswood, Overbury, Shepherd FM Styles & Wood, VINCI Commercial Office Fit-out, Willmott Dixon.

Key areas covered in the report include:

THE COMMERCIAL OFFICE MARKET IN THE UK

• Performance of the Commercial Office Market Sector 2013-14 including levels of take-up, occupiers % share by end-use sector (Banking, Bus.services, Prof.services etc), market supply / availability and rental values.


• Regional Office Markets – Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Leeds, Liverpool, Manchester, Newcastle upon Tyne, Nottingham – take-up levels 2014, review of recent/forecast developments by centre, rents, recent supply, pipelines (sq.ft.)etc.


• Analysis of Central London office market – City, West End, Docklands – take-up levels 2007-14, rents, share by end-use markets etc.


• UK Business Parks Sector – take-up levels 2007-14 sq ft, recent trends, drivers etc.


• Office development in Regeneration areas – key schemes – Kings Cross, Media City, Clyde Gateway, Swindon, Slough etc – size, capital values, main developer, dates etc.


CONSTRUCTION MARKET FOR COMMERCIAL OFFICES

• Construction market overview – value of output for new work 2009-2019 - output by sector (offices, retail, education, health etc).


• Construction output for 2015 and beyond.


• Contractors output in the commercial office sector – 2009-2019 – trends in public/private sector offices, impact of economy.


• 25 leading office schemes – London/Regions – Planning Status, Size, Main Developer, Completion dates.


• Office development pipeline – Central London 2015-2018 – key schemes - Broadgate, Bloomberg Place, London Wall Place etc. – size, status developers etc.


• Office development pipeline – Regions – overview of major schemes – as above.


• Office refurbishment/fit-out market.


KEY INFLUENCING FACTORS

• Planning issues – assessment of Local Enterprise Partnerships.


• Planning issues in Central London – The London Plan (Floor Space Sq.ft by London Area); Crossrail Levy; Community Infrastructure Levy, Conversions etc.


• Conversion of Offices (B1 Class) to Residential Units (C3 Class).


• Sustainability and ‘Green Offices’ – Co2 emissions from office buildings (heating, lighting etc); key environmental legislation, BREEAM Offices; Green Retrofitting Scheme; RE:FIT London. Impact of transport schemes (Crossrail, HS2, Northern Line etc).


• Construction Costs – Premium/Grade A – London/Regions.


KEY PLAYERS IN THE SECTOR

• Engineering and construction contractor capability in the commercial office market –top contractors by projects won..


• Top 20 Fit-out Contractors in office market – turnover/market positioning etc.


• Leading 25 Architectural Practices in office market. – top players, profiles, fee incomes, key schemes etc.


• Leading 20 Developers – top players, profiles, key schemes.

During 2014 the recovery in the UK commercial office market continued, as both business and consumer confidence began to return. Demand has increased across the majority of key regional cities, representing a significant growth in take-up and falling supply, and office rents are now also returning to growth.

As a result of improved market conditions, total take-up for 2014 was estimated to be the highest since 2007 and highlights a return to growth for the office market as a whole. The majority of take-up in 2014 was for grade-B space, reflecting the very limited supply of grade-A stock available. In addition, a sustained recovery in the central London office market in 2014 saw take-up at its highest annual rate since 2001 and all London markets have seen increased occupier demand over the last 12 months; the City saw particularly high levels of take-up, driven by a resurgence in demand from the financial sector, which saw significant growth in 2014. The TMT sector also continued to help drive London take-up.

In terms of construction output, the last 18 months or so has seen renewed demand intensifying across the UK office market, leading to output rising by and an estimated 13% in 2014. Going forward, prospects for office construction output are on the rise, with London and the South East leading the recovery. Offices are expected to drive commercial output growth in 2015 and beyond and, given, the nationwide strength in demand, it is expected that output in the commercial offices market will continue to grow by between 6% and 8% over the next few years. Demand for office RMI is expected to remain strong to 2019, with growth rates of around 3-4%.

In terms of opportunities for the construction market, the resurgence of speculative office development, together with a notable increase in office refurbishments is driving work for contractors operating in the commercial offices sector. Traditionally office fit out and refurbishment work has been dominated by specialist firms but this is changing with a number of larger contractors taking advantage of the increase in office refurbishment work. The outlook over the next 4 years to 2019 remains buoyant for the commercial office market driven by an acute lack of existing stock across many cities, increased demand for space from occupiers and a significant number of lease expiries due over the next few years, which will further fuel demand.

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