After a difficult time, the UK commercial office market has experienced a strong ‘bounce-back’ in output in the last two years, as both business and consumer confidence began to return.
According to AMA Research, demand has increased across London and many key regional cities, representing a significant growth in take-up and falling supply, and office rents are now also returning to growth.
The offices sector was particularly hard hit by the downturn with funding severely restricted and a shrinking development pipeline leading to a significant decline in output and new orders. However, the last 18 months has seen renewed demand intensifying across the UK office market, leading to a growth in construction output by 13% in 2014 to reach £8.7bn.
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 available stock. 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 outlook over the next four years to 2019 remains buoyant for the commercial office construction 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.
“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,” said Andrew Hartley, director of AMA Research. “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.”
Going forward, prospects for office construction output are on the rise, with London and the South East leading the recovery and, given the nationwide strength in demand, it is expected that output in the commercial offices market will continue to grow by between 6-8% per annum over the next few years.
The ‘Commercial Office Construction Market Report – UK 2015-2019 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services with over 25 years’ experience within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.