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Offices

London office investment to hit £5bn in 1H 2019

Overall investment into Central London offices could total £5bn for the first half of 2019, down 39% on the same period in 2018 when £8.1bn was invested by the end of the half year. 

New research from retail estate advisor JLL suggests that a third of all transactions in 2019 to date came from UK investors.

Discussing the findings, Julian Sandbach, Head of Central London Capital Markets at JLL, said: “Political uncertainty is continuing to impact investor confidence at present, and this is most acutely felt by institutional investors who are particularly cautious due to uncertainty and understandably, risk. The irony of the situation is that the reverse is being seen in the occupational market where the volume of space let in the first half of 2019 is forecast to reach 4.3m sq ft, only 6% below the 10-year average.”

The research indicated that occupiers continue to show long-term confidence in Central London, recognising it as a global business centre, with global operators committing to space in the first six months of 2019, including Facebook, Sony Music, G research, Glencore, Milbank Tweed, ERBD and Brewin Dolphin. 

“London has a dwindling supply pipeline and although many cranes can be seen across its skyline a number of these developments have been pre-leased, with broadly 48% of the buildings under construction already let to future occupiers,” said Dan Burn, head of City agency at JLL. 

“The squeeze is more acutely felt with 2019 product where 59% of speculative construction is now leased. In addition, as occupiers vie for the best space, there is a significant amount of space currently under offer, totaling 3.8m sq ft which we anticipate will push leasing totals for the year towards 10m sq ft, in line with 2018. Looking ahead, the low levels of speculative pipeline combined with the sustained occupier demand, will continue the upward pressure on rental growth, especially as the vacancy rate on brand new buildings is 0.5%.”

Sandbach continued: “Undoubtedly the health of the leasing markets will provide an underlying level of confidence to investors, albeit much of this capital is sitting on the sidelines awaiting further clarification on Brexit outcomes. In 2018 inward investment was heavily dominated by Korean and Singaporean capital and whilst we have seen Korean investment recede from London this year, due to concerns from the securities firms to sell down their positions, we are yet to see a new international capital source emerge. Instead we have seen enhanced numbers of private individuals and family offices become more active, particularly in the West End, as a result of a reduction in levels of competition and a less crowded market and for the first time in many years UK buyers have been more active than any other group.

“Whilst investment transactional volumes are down, pricing levels have not suffered and yields have remained firm. The ever-decreasing supply pipeline coupled with strong levels of pre-leasing has led to intense competition for development and refurbishment opportunities across the capital. There is strong appetite from REITs, development managers and property companies seeking to reposition assets that will capitalise on the robust occupier demand and low future supply with pricing being driven hard by the strong competition.

“Furthermore, with London prime yields at an average of 4%, the arbitrage available over prime European cities at 3% is plain to see and for best in class assets, strong competition still exists.”

Office design still harming worker productivity

The UK workforce are happier in their working environments than ever before, with more companies providing services to help deal with employee’s physical and mental well-being.

That’s according to the latest ‘What Workers Want’ report from property agency Savills.

However, the report also suggests that office design can still hinder working productivity, with almost a third polled (32 percent) saying that their workplace’s internal design/ layout decreases their productivity; this increases to 45 percent where people work for an employer with a hot-desking policy.

Savills says that despite hot-desking becoming common practice over the past decade, workers have seemingly not acclimatised to it – in 2016 only 31 percent said hot-desking decreases their productivity.

The report found a significant increase in workers reporting that their workplace is positively impacting their physical and mental health, with 39 percent agreeing that it positively impacts their mental health (up from 33 percentin 2016); 34percent said it positively impacts their physical health (up from 25 percentin 2016). 

According to Savills, this indicates that the message that the workspace can contribute to wellness seems to have been absorbed by companies and landlords, and that they are taking positive action to improve worker well-being.

36 percent of open plan office workers also thought that the space had a negative effect on productivity as opposed to 14 percent of private office workers. Noise levels were also important, with a massive 83 percent admitting it made a difference to them, up from 77 percent in 2016.

34percent of workers said that they’d been asked their views on their office environment by their current employee, opposed to 59 percent who had not.

“Overall, employers are heading in the right direction when it comes to the office,” said Steve Lang, director in Savills commercial research team and co-author of What Workers Want 2019. 

“More UK workers now say that they’re happier with their office than any other time when we’ve run What Workers Want, and there’s been a big improvement in physical and mental health in the workplace over the past three years, indicating that employee well-being and health are being taken seriously. However, the workplace is yet to nail the productivity issue: a significant minority of workers say their office actively harms their productivity, with many voicing concerns about noise and hot-desking.”  

Simon Collett, Savills head of professional services, added: “How the office environment can maximise productivity continues to be a major area of review. While developers, landlords and companies are taking steps to improve worker wellbeing, bringing forward intelligent design measures such as increasing natural light and including more plants, we have a conundrum where happier workers aren’t necessarily more productive workers. Noise levels have been reported as a major issue ever since we started What Workers Want, and they’re only growing in importance. While we’re never going to return to everyone having a private office, those fitting out open plan spaces need to look at acoustic solutions as a major part of the working environment.” 

Image by Michael Gaida from Pixabay

Belfast top city for office investors

The Belfast office market is performing better for investors than the likes of Manchester, Liverpool, Glasgow, Cardiff and London. 

A report produced by Ulster University and MSCI in collaboration with RICS commercial property firms, entitled The Northern Ireland Commercial Property Investment Review, benchmarked the Northern Ireland and Belfast market against UK and European markets. 

The report claims that commercial property in Northern Ireland posted a total return of 1.7 per cent in 2018, down eight per cent the year before, but points out that the income return of seven per cent for NI exceeded that recorded for other UK nations in 2018, with NI continuing to perform, with the Belfast office market seeing returns of 12.4 per cent, well above the UK average of six per cent and European average of eight per cent.

RICS Regional Manager, Susan Mason, said: “This is the only independent analysis of the Northern Ireland commercial property sector that benchmarks it against other regions and cities, so it is an extremely valuable report that will be of significant use to surveyors, investors, and others in the property sector.”

BCO reveals the UK’s best office workplaces

The British Council for Offices (BCO) National Awards winners have been revealed, with Bloomberg’s London HQ scooping both the ‘Best of the Best’ and ‘Corporate Workplace’ awards.

The office was joined by five other award winners recognised for excellence in office space, with the National Awards programme recognising top quality office design and functionality – something that’s integral to the great work carried out FMs and industry suppliers across the country.

The full list of winners is: 

  • ‘Best of the Best’ and ‘Corporate Workplace’: Bloomberg, London
  • ‘Commercial Workplace’: Number One Kirkstall Forge, Leeds
  • ‘Refurbished/ Recycled Workplace’: Here East, London
  • ‘Innovation’: White Collar Factory, London
  • ‘Fit Out of Workplace’: Registers of Scotland – SVP Platform, Glasgow
  • ‘Projects up to 1,500’: Albert Works, Sheffield

Here’s how the BCO’s judges described each of the category winners and the reasons they came out on top:

Bloomberg, located in the heart of the City of London, consolidates the company’s workforce of 4,000 into a new European headquarters for the first time. The BCO judging panel described it as one of the most significant office developments in recent times, and an ‘exceptional’ workplace for its occupants. They agreed that Bloomberg is an exemplar of sustainability and wellbeing: having achieved the highest BREEAM score of any building to date. The judges also were impressed by the building’s striking central spiral ramp, designed to promote collaboration and communication among its staff.

Number One Kirkstall Forge is the first commercial building within Kirkstall Forge, the regeneration of one of the UK’s oldest continually industrialised sites, which will ultimately be transformed into a mixed-used community with a potential for up to 1,000 homes and a total of 300,000 sq.ft. of office space and supporting amenities. The judges praised Number One Kirkstall Forge for delivering a truly unique workplace environment, which subtly reinterprets the site’s wooded riverside setting whilst setting a high standard of contemporary workplace design.

Here East now provides London with a new tech campus comprising 1.2M sq.ft. of office space for a wide range of tenants and start-up companies. The judges noted the clever architectural interventions, which have transformed the building from a two-storey shed with blank, solid facades to an office with a “dazzling” patterned exterior. The panel describe Here East as a benchmark for tech hubs around the world, as well as a major contributor to the ongoing regeneration of its locale.

The 39,285 sqm White Collar Factory, located on Old Street’s ‘Silicon Roundabout’, was lauded by the judges for its ingenuity, creativity and boldness. Notable features of this workplace include a landscaped roof terrace and an elevated running track, both of which have proved popular with tenants. The judging panel commented that the standard set by White Collar factory goes far beyond those of a usual commercial office development and, in their view, will continue to set a high benchmark in innovation for many years to come.

Registers of Scotland – SVP Platform was designed and delivered as a new smart working environment to support the organisation’s digital transformation programme, relocating staff from their previous Glasgow and Edinburgh offices. The BCO judging panel described the project as a great example of the public sector leading the way in the delivery of excellence in offices. They praised those involved in the project for their seamless and enthusiastic collaboration, which has ultimately lead to the delivery of an excellent working environment for the Registers of Scotland workforce.

Albert Works, is a recently completed workplace converted from disused, and previously dilapidated, traditional red-brick industrial warehouses. It is the first phase of a larger £10million ‘Alsop’s Field’ regeneration project in the heart of Sheffield’s Cultural Industry Quarter (CIQ) conservation area. The BCO judges praised the sensitivity and quality of both the restoration of the brick warehouse and the seamless integration of the newer intervention, describing the main external façade as boldly different, yet delicate and sympathetic to the building’s historic industrial context.

Nigel Clark, Chair of the BCO National Judging Panel, said: “Each year, the buildings considered by the BCO Awards judging panel are of an incredibly high standard, representing the very best of the UK office sector. This year’s entrants are no exception, including developments within high profile regeneration projects, prominent new headquarters and innovative refurbishments. The ‘Best of the Best’ winner, Bloomberg, goes beyond best practice – it has delivered something truly exceptional in the heart of London, and has reset the benchmark for corporate headquarter buildings.

Richard Kauntze, Chief Executive of the BCO, added: “This year’s BCO National Awards nominees have variously displayed considered placemaking, innovative design and a commitment to sustainability and wellbeing. The common factors between them all, and for the winners in particular, were the sheer quality of the workplaces, along with the commitment and ambition of all parties involved in the development. Congratulations to all nominees, our highly commended entrants and, of course, the award winners themselves”.

For more information about the awards and the winners this year visit the BCO website (www.bco.org.uk).

Greener office spaces boost bottom line and staff productivity, says WorldGBC…

A report from the World Green Building Council (WorldGBC) reveals the impact building owners, designers, developers and employers are having by investing in greener office spaces.

Released under the organisation’s ‘Better Places for People’ campaign, the document pinpoints the global drive behind implementing green and healthy office operation and design, and showcases 15 buildings that are ‘leading the way’. 

As a result of improving noise levels, layout, lighting and indoor air quality at its office in Doncaster, Skanska cut sick days by two-thirds; in turn saving the company £28,000 in staff costs in 2015.

Terri Wills, CEO of the WorldGBC said: “While our earlier work presented the overwhelming evidence between office design and improved health and wellbeing of workers, this report breaks new ground by demonstrating tangible action businesses are taking to improve their workspaces. The results are clear – putting both health and wellbeing, and the environment, at the heart of buildings, is a no brainer for businesses’ employees and the bottom line.”

The report identifies eight key factors in creating healthier and greener offices which can impact on the bottom line:

  1. Indoor air quality and ventilation – a well-ventilated office can double cognitive ability.
  2. Thermal comfort – staff performance can fall six per cent if offices are too hot and four per cent if they too cold.
  3. Daylighting and lighting– a study found workers in offices with windows got 46 minutes more sleep a night than workers without them.
  4. Noise and acoustics – noise distractions led to 66 per cent drop in performance and concentration.
  5. Interior layout and active design – flexible working helps staff to feel more in control of their workload and encourages loyalty.
  6. Biophilia and views – processing time at one call centre improved by sven-12 per cent when staff had a view of nature.
  7. Look and feel – visual appeal is a major factor in workplace satisfaction.
  8. Location and access to amenities – a Dutch cycle to work scheme saved €27m in absenteeism.

Beth Ambrose, director within the Upstream Sustainability Services team at JLL, and chair of the WorldGBC Offices Working Group added: “The business case for healthy buildings is being proven. All over the world, companies, both large and small, are redesigning their offices, changing working practices and trialling new technologies, to improve the wellbeing of their staff, tenants and customers.” 
Access the full document here