Refurbishment change

A recent report from Savills highlights the changing nature of office schemes in regional cities.

Rising construction costs and slim margins are pushing developers towards refurbishments and the new trend is for a higher quality of refurbishments according to Savills. Nearly 40% of the pipeline of office schemes in regional cities will be delivered in the form of refurbishments.

A sustained level of demand for space in many of the regional cities alongside a lack of new office schemes, is boosting demand for refurbished office space. Landlords are turning to refurbishments to capture lettings from professional occupiers including lawyers, accountants and engineering firms.

As an example, Helical’s ongoing refurbishment of Churchgate House in Manchester which has transformed the building from part-occupied and unattractive to now being fully let. Occupiers have been attracted by a new reception incorporating touch down space, collaborative working areas and a high quality cafe.

Aviva is refurbishing 11 Portland Street, Manchester, which will provide single floors of up to 20,000 sq ft. The major refurbishment incorporates an entirely new principal reception area which has been repositioned to the corner of Portland Street and Aytoun Street.

Savills expect Bristol to be the next city to see a step change in demand for refurbished office space, driven by both a shortage of new build office space.

Metropolis has published business leads on 160 planned office schemes in London and regional cities over the last six months including details of developers and architect contacts, as well as timescales and any pre-lets. In addition Cityoffices.net includes details of all pipeline schemes, with full contact names and numbers.

Regional Office Market Outlook

In a recent 2016 reporty by Savills, the consultant points to a trend for demand for prime office space in regional cities to increase dramatically during 2016.

Savills say that demand is driven by local businesses, start-ups, and the rise in ‘northshoring’, where London costs are driving relocations to regional markets.

Manchester, Birmingham, Cardiff and Edinburgh saw increases of 39%,105% 41% and 44% respectively, above their ten year average annual office take-up, with Birmingham and Cardiff having record years. Bristol is tipped to see the best lettings growth in 2016.

Metropolis has seen a 20% rise in the number of regional city office requirements between 2014 and 2015.

Deutsche Bank’s move to Birmingham and HSBC pre-let of 210,000 sq ft at Birmingham’s new 2 Arena Central scheme are examples of ‘northshoring’ with companies moving staff away from London to cheaper office space in regional cities. In addition, the number of local pre-lets in regional cities is growing, such as Squire Patton Boggs’ pre-let on 27,500 sq ft at No.1 Spinningfields in Manchester and Cirrus Logic’s 70,000 sq ft pre-let at Quartermile 4 in Edinburgh.

Tenant demand has re-ignited speculative office development in regional cities, with construction up 130% on a year ago.

Savills concludes that UK wide activity points to increasing demand from sectors such as TMT which is estimated to see a c.700,000 of jobs created in the regions over the next 10 years. More office requirements from public sector agencies and Central Government are also expected