Savills sentiment survey sees regional office market rush to complete refurb and build projects

08 February 2017

According to the latest Savills Programme and Cost Sentiment Survey* (S.P.E.C.S), every sector and geography across the UK is now seeing new build and heavy refurbishment costs rise. However, despite uncertainty many occupational markets have remained resilient into the second half of 2016 and developers have continued with projects accross all markets.

As the pound remains weak due to ongoing currency volatility, the cost of imported materials remains an issue. With price inflation starting to filter through, it is notable that Savills S.P.E.C.S. score has increased by 17 bps since Q3 2016 (a score above zero demonstrates that costs and timescales are generally rising, whereas a score below zero indicates a fall)**.

Simon Collett, head of building & project consultancy at Savills, comments: “With current economic circumstances having an impact on project costs and timescales, our S.P.E.C.S indicators are in step with these movements and illustrate a direct corralation. As the world adapts to shifts in the global political landcape we expect to see even further changes in the months to come.”

Savills notes, that whilst timescales remain largely static, the regional office market has instead seen developers and landlords rush to complete projects in order to capitalise on potential extra demand for business space. With regional occupier requirements closely linked with the ecomonic cycle as opposed to Brexit negotiations this sector is likely to remain resilient going forward.

Savills research shows that for the fourth successive year take-up in the regional office market has surpassed the long term average of 9.1 million sq ft (845,417 sq m), reaching 9.6 million sq ft (891,869 sq m) in 2016. This strong level of demand has resulted in supply levels decreasing across the UK, falling to 28.4 million sq ft (2,638,446 sq m), a drop of almost a quarter in just five years. With costs expected to rise further still, landlords and developers now have a window of opportunity to commit to new build and refurbishment projects in order to capitalise on this sustained occupier demand. One example of this is Churchgate House in Manchester where Savills has project managed a rolling refurbishment programme on a floor by floor basis. With limited supply of good quality space in this market, recent deals have occured on a pre-let basis and the building is now fully let for the first time in 15 years.

Gary Bulloch, director in the building & project consultancy team in Manchester, adds:  “Given the uncertainties around material prices contractors are starting to factor in allowances to counteract any future fluctuations. Since the start of 2017 we have seen developers and landlords wish to proceed with even greater pace than before in order to capitalise on current market conditions.”

To view the full S.P.E.C.S report click here.

 
 

General Enquiries

Savills Margaret Street

 

Key Contacts

Kevin Mofid

Kevin Mofid

Director
Commercial Research

Savills Margaret Street

 

Simon Collett

Simon Collett

Director - Head of Division
Building & Project Consultancy

Savills Margaret Street

+44 (0) 20 7409 5951