UK offices take off 17th August 2012

The office construction market grew rapidly during the first few months of 2012 as the sector continued its recover, reports Glenigan.

Compared with the same period in 2011, there was a 229% increase in the value of new project starts in the three months to May. With trophy projects valued at over £100m removed from the data, the ‘underlying’ value of project starts was up 95% year on year for the three months to May – having contracted by 68% between 2007 and 2011 – as developers now look to capitalise on the lack of available office space in prime locations.

Over 2009, London accounted for 26% of the underlying value of project starts. By 2011, this had risen to 45% and now, with the UK continuing to experience a two-speed recovery, London accounted for 59% of the value of all office schemes started during the three months to May 2012 due to the relative reliability of occupier demand for Grade A office space in the capital.

The Glenigan figures also show that growth in the sector as a whole is set to continue throughout 2012 and beyond. Detailed planning approvals for office schemes were up 51% on a year ago during the three months to May, again boosted by several high profile schemes, while the underlying value of contracts awarded grew 70% – a strong indication Glenigan said that an increasing number of projects will soon be starting on site.

Allan Willen, economics director at Glenigan, said: “The office sector is in a period of recovery following a traumatic post-credit crunch slump in building, and is now outpacing the rest of the construction industry. The market has improved dramatically since last summer, especially in prime locations such as London, where a lack of new space coming onto the market in recent years has led to a more favourable balance of supply and demand. “The remarkable rise in new office projects getting underway during the first few months of 2012 looks to be just the beginning. We anticipate continued growth in the value of project starts through to 2014, as rising take-up and limited availability of Grade A office space encourages building in prime locations.

At the same time, there are encouraging signs for many other UK regions, with Wales, the North East and the North West in particular already showing a year-on-year increase in the value of project starts and looking set for growth in 2012.”