For the first time in eight years the rate of office building in the UK has returned to pre-recession levels…
Figures from consultancy firm Barbour ABI have revealed office construction rates are returning to levels seen before the recession hit the UK.
According to the data some £2bn of contracts were awarded in Q1 2016. This figure is around the same seen during 2007-08, before the recession hit.
Demand for office space in popular locations and a lack of suitable facilities has pushed the sector to grow recently. Property advisers JLL said last year saw a record number of pre-let offices waiting to be built in Manchester, Birmingham, Leeds, Bristol, Edinburgh, and Glasgow, showing a movement from London to region cities. The capital still saw the main bulk of new projects, but this could change as many companies move to cheaper locations.
Manchester is expected to need an extra three million square feet of office space over the next decade if it is to maintain pace with the forecasted growth for the city.
Barbour ABI’s chief economist Michael Dall said that the trend is expected to continue throughout the rest of 2016, “barring the potential negative impact of Brexit on the construction industry”.
The sector is also seeing an increase in the value of contracts, with six large new developments worth more than £50m each. This includes the 10-storey £90m Waterloo Street block in Glasgow, and the £50m Forbury Place in Reading.
The construction sector was hit badly by the financial crisis, losing some 13 per cent of employees (337,000 workers) since 2008. A significant number of small firms also went into administration as larger firms were forced to undertake smaller projects at lower margins. Recovery is starting to be seen, and the recent surge in building has even led to some concerns in the property industry about oversupply.
However, analysts at research firm Green Street Advisors said supply in London is still low, with vacancy rates at less than three per cent and net supply falling.
Managing director Hemant Kotak said: “The overall [London] market is very tight and new space is needed.”