EG LONDON REFURBISHMENT


Redevelopment


Applications for refurbishments are outstripping those for new-builds in the London office market as landlords and occupiers see the cost benefits in smartening up existing stock. David Quinn reports


R


eplacing something old with something new is, in its most simple terms, what keeps the property sector ticking over. But it is not just about new-


build. The need for fresh product


is an increasingly important driver of refurbishment and redevelopment activity in the London office market. In fact, according to EGi data for Westminster, the City and Camden, the number of applications for refurbishments more than trebled in the past six years – ie, since before the downturn – and have risen a third faster than new-build applications between 2007 and 2012. According to Bradley Baker, head of


central London tenant representation at Knight Frank, the economic picture means growth in staff numbers and turnover cannot be relied on to provide the churn of tenants that landlords and developers need to thrive. Instead, the obsolescence of buildings is pushing occupiers to swap their space, even when upsizing is not an option. “Everyone is looking to see what is


making occupiers move at the moment, and without those grand expansion plans, an important factor is the plethora of 1980s buildings – perhaps let on 20- or 25-year leases – that are heading towards the end of their economic lifecycle,” he says. The design attributes of these buildings


are driving landlords increasingly towards the idea of refurbishments, according to some in the industry. “From the mid-1980s, you had a


raised-slab design to allow raised- access floors, and that generational shift means that these buildings are increasingly suitable for refurbishment, rather than demolition being the default scenario,” says Dan Bayley, central London managing director at BNP Paribas Real Estate. Additionally, the financial factors that


make new development a suitable solution for landlords do not always add up favourably, particularly in the City. “Very few people will be prepared to


demolish a building and start again when an incumbent tenant might be paying £40


rethink


per sq ft or more. If you are only getting £50-£55 per sq ft on new-build, it is not stacking up from a landlord’s point of view,” says Simon Crotty, City offices director at Colliers International. While agents suggest a new-build


project may take as much as six years to generate income once planning, construction and a rent-free period is taken into account, the timescale on even a comprehensive refurbishment, including exterior recladding, might be little more than a year (see case study, p82). “It then becomes, for a lot of


developers and landlords, a much easier argument,” says James Gillett, City agency director at Savills. “Deal with the dilapidations, gut it, sort


the air conditioning, do the entrance hall and if possible put a new floor on top. The product can be ready in 12 months.” So what factors have to be taken into


account once a refurbishment is decided upon? While Gillett suggests a definite


formula, he also points out that no two


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25