Commercial Office Construction Market Report UK 2019-2023

The 6th edition of the ‘Commercial Office Construction Market Report – UK 2019-2023’ focuses on construction activity within the UK Commercial Office Market against a backdrop of continued economic uncertainty surrounding Brexit.

Key issues covered in the report include:

• Structure and size of the UK Commercial Office sector in both London and in key regional cities including Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Southampton and Northern Powerhouse cities of Leeds, Liverpool, Manchester and Newcastle.
• Analysis of key drivers of office activity across London and the Regions including: Take-up, Availability and Supply, Prime Office Rents.
• Analysis of key end-use sectors in the office market, e.g. Professional services and TMT sectors, Government and public sectors.
• In-depth analysis of the London Office Market, focusing on activity in the City, the West End, Docklands/East and key emerging office markets such as Kings Cross, Southbank, Vauxhall-Nine Elms & Battersea (VNEB), White City and Stratford.
• Analysis of high rise office development and key schemes.
• Detailed review of major construction and fit-out contractors and architects involved in commercial office sector construction – overview of contractor capability and contract experience.
• Key Developers and Investors in the commercial office market – overview of commercial office portfolios and development pipelines.
• Analysis of Construction output in the commercial office sector with estimated forecasts over the next few years to 2023.

Areas of particular interest include:

• Analysis of the impact of Brexit on the commercial office market, with demand for office space from the banking/financial sectors weakening in Central London. Brexit uncertainty has also impacted on developer willingness to invest in large projects with speculative development rates slowing.
• Regional development trends, the shortage of Grade A office space in some major cities and an overview of major developments.
• A review of the key issues affecting the commercial office market including: Planning Issues; the London Plan; Permitted Development Rights (PDR); impact of Business Rates Revaluation in 2021 on office rents; the impact of Transport Infrastructure schemes on office development; sustainability in office design; office construction costs; and modern methods of construction.

Some of the companies included:

Abstract Securities, ADP, AHH Construction, AHR,Allies & Morrison, Argent, Arup, Aukett Swanke, Balfour Beatty, BAM, Barlow Interiors, Barnwood Interiors, BDP, Beck Interiors, Bowmer & Kirkland, 8Build, Bridgford Interiors, British Land, Broadway, Brookfield Properties, Buro Happold, BW Interiors, Byrne Group, Canary Wharf Contractors, Clark Contracts, Collins Construction, Como Interiors, Derwent London, 3D Reid, Eric Parry, Eric Wright Group, Faulkner Browns, Feilden Clegg Bradley, Foggo Associates, Frogmore, Galliford Try, Glenn Howells, Graham Interiors, Great Portland Estates, Grimshaw, Grosvenor, Havelock Europa, Heron International, Hines, HKR, HLM Architects, HOK, Hurst Group, Interserve, ISG, John Sisk, Kier, Kohn Pedersen Fox, Laing O’Rourke, Land Securities, Lend Lease, MACE, M&G Real Estate, MAKE Architects, Malyan, Maris Interiors, McLaren Construction, McLaughlin & Harvey, MEPC, Midas Construction, MITIE Interiors, Modus Group, Morgan Lovell, Morgan Sindall, Morris & Spottiswood, Multiplex, NG Bailey, Norr Architects, Overbury, Paragon Interiors, Parkeray, Patton Fit-out, Peel, PLP Architecture, Portview, Railston, RG Carter, Robertson Construction, Royal Institute of British Architects (RIBA), Russells Construction, Scott Brownrigg, Seddon Group, Sharkey, Sheppard Robson, Simons Construction, SimpsonHaugh & Partners, Simpson (York), Skanska, SOM, Speller Metcalfe, Stanhope, St. Modwen, Stride Treglown, Structuretone, Styles & Wood, Swanke Hayden Connell, U&I, Urban & Civic, Vinci, Wates Interiors, Willmott Dixon, Woods Bagot,

Construction Market for Commercial Offices

• Overall Construction Output – Total Construction Output to 2023; Construction Output by Sector
• Value of Construction Output and New Orders in the Commercial Office Sector.
•  Market Prospects for Commercial Office Construction Output.
• Overview of the UK Commercial Office Planning & Development Pipeline – Commercial Office Construction Contracts; Office Planning Pipeline to 2023.
• London Office Construction Market and Pipeline: Central London Office Market – Contracts Awarded; Contracts in the Pipeline; Central London Office Development Pipeline.
• London Office Market – Emerging Areas of Development.
• Regional office Construction Market and Pipeline: Regional Office Contracts Awarded in 2018; Regional Office Market – Contracts in the Pipeline; Regional Office Development Pipeline.

The Commercial Office Market in the UK

• Performance of the Commercial Office Sector: Take-up; Office Occupiers by End-use Sector; Supply; Rental Growth.
• Regional Office Markets: Birmingham; Bristol; Cardiff; Edinburgh; Glasgow; Leeds; Liverpool; Manchester; Newcastle; Sheffield
• London Office Market: City; West End; Docklands
• Commercial Offices – Tall Buildings Market in the UK
• Outlook for the Commercial Office Market

Factors Affecting the Commercial Office Market

• Planning Issues: National Planning Policy; Local Enterprise Partnerships;
• Planning Issues in London: The London Plan – Office Development/High Rise Development; London Mayoral Infrastructure Levy
• Conversion of Offices to other Uses
• Business Rates
• Sustainability and Green Offices: Carbon Emissions from Office Buildings; Key Environmental Legislation Affecting Offices ; BREEAM for Office Development
• Modern Methods of Construction (MMC) in the Commercial Office Market
• Impact of Transport Projects on the Commercial Office Market: Transport Developments in London; Transport Developments across the Regions.

Contents Listing

1. INTRODUCTION 8
2. SUMMARY AND FUTURE PROSPECTS 10
3. ECONOMIC ENVIRONMENT 14
3.1 OVERVIEW AND OUTLOOK 14
3.2 KEY DATA 15
3.2.1 GDP 15
3.2.2 Inflation & Interest Rates 15
3.2.3 Employment & Wages 16
3.2.4 Household Consumption 17
3.2.5 Sterling 18
4. CONSTRUCTION MARKET FOR COMMERCIAL OFFICES 19
4.1 OVERALL CONSTRUCTION OUTPUT 19
4.1.1 Total Construction Output to 2023 19
4.1.2 Non-Residential Construction Output by Sector 21
4.2 CONSTRUCTION OUTPUT IN THE OFFICES SECTOR 23
4.2.1 Overview and Definition 23
4.2.2 Value of Construction Output and New Orders in the Offices Sector 23
4.2.3 Market Prospects for Office Construction Work 26
4.3 UK COMMERCIAL OFFICE CONSTRUCTION DEVELOPMENT PIPELINE 29
4.3.1 Commercial Office Construction Contracts 29
4.3.2 Office Planning Pipeline 30
4.4 LONDON OFFICE CONSTRUCTION MARKET AND PIPELINE 31
4.4.1 Central London Office Market – Contracts Awarded 31
4.4.2 Central London Office Market – Contracts in the Pipeline 31
4.4.3 Central London Office Development Pipeline 33
4.4 REGIONAL OFFICE CONSTRUCTION MARKET 37
4.4.1 Regional Office Contracts Awarded in 2018 37
4.4.2 Regional Office Market – Contracts in the Pipeline 38
4.4.3 Regional Office Development Pipeline 39
4.5 REGIONAL ANALYSIS 41
4.5.1 Birmingham 41
4.5.2 Bristol 42
4.5.3 Cardiff 43
4.5.4 Edinburgh 44
4.5.5 Glasgow 45
4.5.6 Leeds 46
4.5.7 Manchester 47
4.5.8 Newcastle-Upon-Tyne 48
4.5.9 Sheffield 49
4.6 OFFICE REFURBISHMENT/FIT OUT MARKET 51
5. THE COMMERCIAL OFFICE MARKET IN THE UK 53
5.1 PERFORMANCE OF THE COMMERCIAL OFFICE SECTOR 53
5.1.1 Take-up 53
5.1.2 Office Occupiers by End-use Sector 54
5.1.3 Supply 55
5.1.4 Rental Growth 56
5.2 REGIONAL OFFICE MARKETS 57
5.2.1 Birmingham 61
5.2.2 Bristol 61
5.2.3 Cardiff 62
5.2.4 Edinburgh 62
5.2.5 Glasgow 63
5.2.6 Leeds 64
5.2.7 Liverpool 64
5.2.8 Manchester 65
5.2.9 Newcastle 66
5.2.10 Sheffield 66
5.3 LONDON OFFICE MARKET 67
5.3.1 City 68
5.3.2 West End 70
5.3.3 Docklands 72
5.4 COMMERCIAL OFFICES – TALL BUILDINGS MARKET IN THE UK 74
5.5 OUTLOOK FOR THE COMMERCIAL OFFICE MARKET 77
6. FACTORS AFFECTING THE COMMERCIAL OFFICE MARKET 79
5.1 PLANNING ISSUES 79
5.1.1 National Planning Policy 79
5.1.2 Local Enterprise Partnerships 79
5.1.3 Planning Issues in London 80
5.1.4 Conversion of Offices to other Uses 84
5.1.5 Business Rates 85
5.2 SUSTAINABILITY AND ‘GREEN’ OFFICES 85
5.2.1 Carbon Emissions from Office Buildings 85
5.2.2 Key Environmental Legislation Affecting Offices 87
5.2.3 BREEAM for Office Development 89
5.3 MODERN METHODS OF CONSTRUCTION (MMC) IN THE COMMERCIAL OFFICE MARKET 89
5.4 CONSTRUCTION COSTS 91
5.4.1 Tall Buildings – Construction Costs 92
5.5 IMPACT OF TRANSPORT PROJECTS ON THE COMMERCIAL OFFICE MARKET 94
5.5.1 Transport Developments in London 94
5.5.2 Transport Developments across the Regions 97
7. CONSTRUCTION MARKET SUPPLY – OFFICE SECTOR 99
7.1 LEADING CONSTRUCTION CONTRACTORS IN THE COMMERCIAL OFFICE SECTOR 99
7.1.1 Contractors’ Market Share in the Office Sector – By Contract Awards 99
7.1.2 Fit-out Contractors in the Commercial Office Sector 100
7.2 CONTRACTOR PROFILES 101
7.2.1 Wates 101
7.2.2 Lendlease 101
7.2.3 BAM 102
7.2.4 Mace 102
7.2.5 Laing O’Rourke 103
7.2.6 Kier 103
7.2.7 Sir Robert McAlpine 104
7.2.8 ISG 105
7.2.9 Skanska 105
7.2.10 Canary Wharf Group 106
7.2.11 Multiplex 106
7.2.12 Morgan Sindall 107
7.2.13 Willmott Dixon 108
7.2.14 Others 108
7.3 LEADING ARCHITECTURAL PRACTICES & DEVELOPERS IN THE COMMERCIAL OFFICE SECTOR 113

Tables & Charts

TABLE 2: GDP DATA – 2015-2019 – KEY CONSTITUENT ELEMENTS 15
CHART 3: INTEREST RATES AND INFLATION (CPI) FROM 2008-2023 16
TABLE 4: AVERAGE WEEKLY EARNINGS DATA – GB – TOTAL PAY – 2014-2019 (SEASONALLY ADJUSTED) 17
CHART 5: PDI & SAVINGS RATIO AT CURRENT PRICES 2008-2023 17
TABLE 6: EXCHANGE RATE FLUCTUATIONS 2015-2021 – STERLING TO THE DOLLAR, AND THE EURO, SPOT RATES 18
CHART 7: VALUE OF TOTAL CONSTRUCTION OUTPUT 2014-2023 BY VALUE (£BN AT CURRENT PRICES) 19
CHART 8: NON-RESIDENTIAL CONSTRUCTION OUTPUT (GB) BY SECTOR 2018 – % BY VALUE 21
CHART 9: OFFICE CONSTRUCTION OUTPUT (GB) BY SECTOR 2018 – % BY VALUE 23
TABLE 10: CONTRACTOR’S OUTPUT IN THE OFFICES SECTOR (PUBLIC & PRIVATE) 2009-2018 (£M) 24
CHART 11: OFFICE OUTPUT AND NEW ORDERS GB QUARTERLY ANALYSIS Q1 2015 TO Q4 2018 – BY VALUE (£M AT CURRENT PRICES) 25
CHART 12: VALUE OF OFFICE CONSTRUCTION OUTPUT 2014 – 2023: BY VALUE (£M AT CURRENT PRICES) 26
CHART 13: OFFICE CONTRACT AWARDS Q1 2016 – Q1 2019 BY VALUE (£M) AND NUMBER OF CONTRACTS 29
CHART 14: OFFICE CONTRACTS IN THE PIPELINE 2019-2029 BY VALUE (£M) AND NUMBER OF CONTRACTS 30
CHART 15: LONDON OFFICE CONTRACTS IN THE PIPELINE 2019-2029 BY VALUE (£M) AND NUMBER OF CONTRACTS 32
CHART 16: LONDON – OFFICE CONSTRUCTION CONTRACTS IN THE PIPELINE BY BOROUGH (AS AT MID-APRIL 2019) (%) 32
CHART 17: LONDON OFFICE DEVELOPMENT PIPELINE: TOTAL DEVELOPMENT SPACE ANTICIPATED 2018-2023 (SQ. FT. M) 33
CHART 18: LONDON OFFICE DEVELOPMENT PIPELINE: CITY, WEST END, MIDTOWN, DOCKLANDS AND OTHER AREAS: 2018-2022 (SQ. FT. M) 34
TABLE 19: LONDON OFFICE MARKET: KEY SCHEMES IN DEVELOPMENT – SIZE, MAIN DEVELOPER, COMPLETION DATE 36
CHART 20: UK OFFICE CONSTRUCTION CONTRACT AWARDS BY REGION 2018 (%) 37
CHART 21: REGIONAL OFFICE CONTRACTS (EXCLUDING LONDON) IN THE PIPELINE 2019-2029 BY VALUE (£M) AND NUMBER OF CONTRACTS 38
CHART 22: UK OFFICE CONSTRUCTION CONTRACTS IN THE PIPELINE BY REGION (AS AT MID APRIL 2019) (%) 39
CHART 23: REGIONAL OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2021 (SQ. FT. M) 40
CHART 24: REGIONAL OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2021 (SQ. FT. M) BY CITY/REGION 40
CHART 25: BIRMINGHAM OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2025 (SQ. FT. M) 41
CHART 26: BRISTOL OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2021 (SQ. FT. M) 42
CHART 27: CARDIFF OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2028 (SQ. FT. M) 43
CHART 28: EDINBURGH OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2020 (SQ. FT. M) 44
CHART 29: GLASGOW OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2023 (SQ. FT. M) 45
CHART 30: LEEDS OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2022 (SQ. FT. M) 46
CHART 31: MANCHESTER OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2023 (SQ. FT. M) 47
CHART 32: NEWCASTLE OFFICE DEVELOPMENT PIPELINE: TOTAL/SPECULATIVE DEVELOPMENT SPACE ANTICIPATED 2019-2021 (SQ. FT. M) 48
TABLE 33: REGIONAL OFFICE MARKET: KEY SCHEMES IN DEVELOPMENT – SIZE, MAIN DEVELOPER, COMPLETION DATE 50
CHART 34: UK OFFICE MARKET – TOTAL TAKE-UP LEVELS: 2009-2018 (SQ. FT. M) 53
CHART 35: UK OFFICE MARKET: TAKE-UP BY END USE SECTOR 2018 (%) 54
CHART 36: UK OFFICE MARKET – AVAILABILITY 2009-2018 (SQ. FT. M) AND VACANCY RATE (%) 56
CHART 37: AVERAGE UK OFFICE RENTS 2015-2020 (£/SQ. FT. M) 57
CHART 38: REGIONAL OFFICE MARKET – TAKE-UP LEVELS (SQ. FT. M) BY CITY 2018 58
TABLE 39: REGIONAL OFFICE MARKETS – KEY FUNDAMENTALS 2018-19 60
CHART 40: CITY OFFICE MARKET – TOTAL TAKE-UP LEVELS: 2009-2018 (SQ. FT. M) 68
CHART 41: CITY OFFICE MARKET: TAKE-UP BY END USE SECTOR 2018 (%) 69
TABLE 42: CITY OFFICE PRIME RENTS: 2009-2018 (£/SQ. FT.) 69
CHART 43: WEST END OFFICE MARKET – TOTAL TAKE-UP LEVELS: 2009-2018 (SQ. FT. M) 70
CHART 44: WEST END OFFICE MARKET: TAKE-UP BY END USE SECTOR 2018 (%) 71
TABLE 45: WEST END OFFICE PRIME RENTS: 2009-2018 (£/SQ. FT.) 72
CHART 46: DOCKLANDS OFFICE MARKET – TOTAL TAKE-UP LEVELS: 2009-2018 (SQ. FT. M) 73
CHART 47: DOCKLANDS OFFICE MARKET: TAKE-UP BY END USE SECTOR 2018 (%) 73
TABLE 48: DOCKLANDS OFFICE PRIME RENTS: 2009-2018 (£/SQ. FT.) 74
TABLE 49: TOP HIGH-RISE OFFICE SCHEMES IN THE UK PIPELINE 76
TABLE 50: LONDON PLAN – DEMAND FOR OFFICE-BASED EMPLOYMENT AND FLOOR-SPACE 2016-2041 81
TABLE 51: MCIL2 – INDICATIVE CONTRIBUTIONS BY END USE SECTOR AND BY CONTRIBUTION AREA (£/SQ. M.) 83
TABLE 52: BREAKDOWN OF NON-DOMESTIC BUILDINGS’ EMISSIONS BY SECTOR 86
TABLE 53: BREAKDOWN OF NON-DOMESTIC BUILDINGS’ EMISSIONS BY SECTOR 87
TABLE 54: COMMERCIAL OFFICE CONSTRUCTION COSTS – 2018 (£/SQ. M. GIA) 91
CHART 55: OFFICE CONTRACT AWARDS 2018 – APPROXIMATE SHARE BY CONTRACTOR 99
TABLE 56: LEADING ARCHITECTS IN THE COMMERCIAL OFFICE SECTOR 2019 114
TABLE 57: LEADING DEVELOPERS IN THE COMMERCIAL OFFICE SECTOR 2019 117