Rough with the smooth

As we edge into a new decade, the property industry is still raw in the knowledge that commercial regeneration has dropped by 30 to 40 percent during the economic downturn. As John F. Kennedy once said: “The time to repair the roof is when the sun is shining.” This sums up Britain’s non-starter attitude to building work over the past few years.

He went on to say: “There are risks and costs to a programme of action. But they are far less than the long-range risks and costs of comfortable action.” The latter is now starting to come through in business plans and perspectives. It marks the return of a positive ‘urban renaissance’ attitude, which we started the 21st century with.

Looking back
In a desperate bid to reduce outgoings, the majority of businesses put a total freeze on spending in 2007. The impact of this ‘make-do’ outlook naturally resulted in hard times for the property industry. On the whole, projects that did go ahead took place on a smaller scale to help cut costs; it’s difficult to deny that times have been tough.

On the flip side, the trend of regenerating commercial space has continued. Business owners, chief executives and investors have been drawn by the romantic appeal of classical buildings, so refits and refurbishments have persisted in older buildings, albeit on a smaller scale and frequency. Some companies have been buoyant enough to follow through with refit and refurbishment plans. Offices, retail spaces and banks have occupied the majority of regeneration projects due to the higher level of investment they have received. In essence, there’s an element of ‘business as usual,’ which has helped to keep the industry ticking over.

Commercial property management firm Bruntwood has demonstrated resilience in the face of recession. One project it has undertaken involved the Cat A refurbishment of 23,000 sq ft of office space on a single floor at The Plaza in Liverpool. The former head office of Littlewoods Pools underwent extensive refurbishment, including a new reception and entrance featuring floor to ceiling glazing, a customer lounge area, on-site shops and state-of-the-art meeting rooms to create a contemporary and fully-functional office space.

S&W met the specification for full air conditioning, raised access floors, new toilets and lift lobbies to provide a flexible, open plan suite. The careful and considerate refurbishment project was performed with cost and efficient delivery very much in mind. The premises now function as a contemporary office environment. The enhanced building reflects JFK’s statement above, as the action taken appeals to those wanting to take small steps now to reap the benefits of their actions later.

The work was completed within 10 weeks and is now ready to be let out to tenants. This project met the brief of providing a modern, stylish workspace, which reinforces the welcome fact that regeneration work is still taking place.

Onwards and upwards
The current uncertainty in the commercial property market will continue well into the new decade. With industry fears of a collapse in 2012, it is sitting tight as contractors and developers attempt to ride out the storm yet again. The sub-national economic growth white paper, published in October 2010, announced that this year’s budget will reveal a new delivery structure for distributing cash from the European Regional Development Fund, which is currently administered by the Regional Development Agencies.

The paper, which outlined plans for Local Enterprise Partnerships (LEPs) to replace Regional Development Agencies (RDAs), offers some positives for the property industry, as it provides more scope for collaborations between councils and private companies. The nay-sayers have, of course, raised their heads and talked-down the plans, labelling them ‘toothless talking shops’. However, the positives remain – private companies, such as S&W, should benefit from more business coming from the public sector.

The sector must be viewed separately of course. The spending review outlined by the Government signalled a difficult period as ministers tightened the public purse strings. New building projects are being reduced and maintenance work has been put under even closer scrutiny. However, the fact remains that there is a plethora of work that is still bubbling away, especially where the health sector is concerned. For property specialists, the point, or rather the challenge ahead, lies in undertaking the work to tight budgets.

The outlook for architects is also difficult, according to the RIBA Future Trends Survey. This has revealed growing scepticism amongst architects in 2010. It found that 42 percent of practices expected a further decrease in future public sector projects, compared with 38 percent in June and just 25 percent in May.

The outlook is more positive regarding the private sector, as only 19 percent of firms expect commercial sector work to decrease. So, with 81 percent believing it will either increase or stay constant, there is light at the end of the tunnel.

In spite of a lack of high quality new offices being built, especially in London, more clients are now opting to move to space under pre-let tenancy agreements. Here, businesses are calling in developers and refit specialists to update the look and feel of the workspace to make it their own.

Landlords are also offering incentives to tenants to remain in place, which include rent-free periods or contributions for refurbishments. This equates to the same thing for an occupier – more money to spend on their offices.

Sustainability
Sustainability is arguably the hottest topic in the property and construction industry today and one that is increasingly important. Developers, architects and contractors have to meet with the demands set out by the UK Government and European guidelines to reduce C02 emissions and global warming. The current figures show that 20 percent of carbon emissions come from non-dwellings in the UK, which has signalled the need for EPCs (Energy Performance Certificates). These useful pieces of legislation ensure the maximum energy efficiency rating possible for all new buildings.

The compliance with BREEAM (BRE Environmental Assessment Method) will also become more of a priority throughout the next ten years to ensure the design; construction and management of buildings meet the best practice guidelines for sustainability. The positive point remains that these guidelines lean towards a greener working environment for occupants and will become vital for landlords wishing to let their properties for the maximum rent.

As we cautiously enter a new decade, there is good and bad news for the commercial property market. While there’s a certain amount of investment available, a black cloud still lingers overhead signalling a possible collapse in 2012.

Rents will continue to fall for the next two to five years and take up of new-build office, industrial and retail space will remain minimal.

However, with these challenges come opportunities, providing increased scope for regeneration work, as companies are forced to stay put and increase their green credentials. One of the biggest challenges is making the necessary changes in line with sustainability targets, while keeping to stricter budgets. It’s definitely going to be a testing time for the industry and one that only a crystal ball could possibly reveal.