What does the future hold for the UK office sector?
As Prime Minister Boris Johnson announces 'Freedom Day' on 19th July, what's the outlook for the commercial office sector as WFH guidance is scrapped? Unlike last summer, there's no big push from ministers to get workers back in the office. The pandemic has certainly accelerated underlying trends towards back officing and flexible leasing, and the sustainability agenda and drive to 'build back greener' may have changed the way we think about the workplace forever.
But the office sector is far from dead. Compared to hospitality down by 50% and finance down by 2.3%, the sector is showing remarkable resilience down just 1.5%. Rates collected are currently running at 98% outside London, and 92% in the capital. Experts predict a return in investor confidence that could push the sector into growth by as early as 2022.
Multi-use and mixed developments
Landlords are already looking at their portfolios to see how they can better adapt to trends in health and wellbeing. There's an increasing appetite for generations to live, work and play together in urban areas that will impact the way buildings are designed and fitted out or refurbished.
With the recent high court judgement against Sports Direct and the withdrawal of high street names like John Lewis and Debenhams from bricks and mortar premises, there's an opportunity to redevelop vacant retail space - an opportunity that John Lewis is already seizing with the announcement of 10,000 homes on its land, some over existing Waitrose stores.
However, with the return to work gathering pace, mixed developments will need to be aware of the need for office and retail space as we move into the next phase of the pandemic.
Sustainability and opportunity
When it comes to sustainability and the commercial construction sector, the statistics tell their own story. The built environment accounts for 40% of global emissions, with 11% coming from the construction sector and 28% from the running of buildings. The sector clearly has an influential role to play in reducing those figures and a re-evaluation of construction methods has seen leaner methods embraced and others sidelined in favour of MMC and other energy-efficient methods.
The pandemic has thrown the fragility of supply chains into stark relief and there's a real opportunity for construction to cut waste by focusing on local providers. Investors are also beginning to ask questions about the performance of buildings and supporting those office projects with clear sustainability targets and certification.
With the return to the office now firmly in our sights, now could be the time to embrace the opportunity to look outside London for a faster recovery. With hybrid forms of working now embedded in most sectors, office project starts are expected to fall by just 3% in 2022 before edging upwards in 2023. The lesson for contractors is to be agile as the sector enters a disruptive period post-Covid. The effects of the government's levelling-up agenda, adapting to the digital revolution and strengthening supply chains will help to mitigate risks while the sector needs to grasp emerging opportunities to deliver retrofit projects in the commercial sector in the coming months.