The AJ talks to Richard Kauntze, chief executive of the BCO, on office developments in the UK in advance of the BCO annual conference in May
What challenges do you foresee in maintaining sufficient office buildings in the UK over next 10 years?
Demand for office space is highly variable across the UK and still recovering from the 2008/09 recession.
Outside of London, the main challenge is that there is too much under-used space, rather than not enough. However, our research with the Centre for Cities shows there are positive signs emerging that cites such as Manchester, Reading and Cambridge have an increasing demand for office space that must be met to foster economic expansion.
London is building more new-build space to meet future demand. According to Drivers Jonas Deloitte, about 222,000m2 of skyscraper space is currently under construction, which is enough to house 25,000 workers. However, this is still less than pre-recession levels and as such there is still a shortage of stock in the capital.
As occupier confidence slowly returns, more speculative development will occur, and the challenge will be in ensuring it meets quickly evolving occupier needs.
What opportunities are there for architects in retrofitting current office and commercial buildings in the UK?
Retrofitting is on the rise due to a multitude of factors, which is providing good opportunities for architects.
Conditions are ripe for refurb
Due to the introduction of new sustainability measures, such as embodied energy conservation, it is becoming a much more popular and sensible choice for occupiers. Also, in the current market, characterized by less speculative new-build and cashflow, conditions are ripe for refurb.
In light of this, architects are already offering innovative solutions that cater for specific occupier needs. For example, TMT firms are partial to ‘Google type’ funky fit-outs, whereas financial service firms place a high prerogative on efficient use of space and a more traditional office lay-out.
What about the opportunities for architects in designing new office buildings? How much potential do you see for increased building of office spaces in the current climate?
The success of the TMT sector, which now accounts for 30 per cent of office space in the West End and City compared to just 10 per cent in 2009, is leading the way in opening up opportunities for architects.
New-build opportunities are mainly confined to London, with Kings Cross and Victoria’s major refurbishment programmes representing shining beacons of hope in the current climate.
There are opportunities for architects who can create open-plan, flexible and sustainable workspace
The BCO believes that an approach which focuses on the basics of office development is fundamental in the current climate. For instance, creating open-plan, flexible and sustainable workspace that is cost-effective is vital to occupiers. Whether this is new-build or refurbishment, there are opportunities out there for architects that can meet these criteria.
There was talk at MIPIM of a shift of commercial investment from London to the regions. What are you views on this?
Prime office rents in the City of London are over £50 per sq ft and very much higher in the West End, whilst in the regions the price is no more than £30 per sq ft. From this perspective the regions are not more lucrative, but they do offer long-term value for money which many developers are tapping into.
For instance, the Co-Operative Bank’s new headquarters in Manchester at One Angel Square has spearheaded a robust performance that has seen Manchester rents rise 3 per cent in 2012. However, when looking at the bigger regional picture, office demand is down 11 per cent on the 10 year average according to Knight Frank.
Naturally, London is still the city where the most lucrative deals are being signed. As the engine for economic growth, prime office space in central London helped attract £14 billion of international investment last year.
Do you think that developers taking advantage of the new office-to-home conversions rules will affect commercial stock? And will that have adverse implications on office rental rates?
This is a concern that our members have and our stance is that it is imperative that the need for investment in high quality office new-build and refurbishment should not be underestimated.
Across the UK there are many cities where office space is vital to facilitate economic expansion and to bring down high rental costs. The West End already now has some of the highest rents in the world, but the hotspots outside of the capital are also in urgent need of new-build development to help bring down rents.
To elaborate, our research with the Centre for Cities highlights that in the buoyant regional economies it costs on average 50 per cent per square metre more than the national average to hire an office for a year. Yet office building has not responded to these high prices, with increase in office space in most of these cities well below the national average.
The BCO annual conference will take place in Madrid from 15-17 May 2013.
For more information please visit: www.bco.org.uk/Conference
Richard Kauntze: conditions are ripe for office retrofit