office fit-out Supply pressure and format innovations


impact office fit-out market The office fit-out and refurbishment market in the Thames Valley and South Coast is at an interesting point. Demand appears to be holding steady but could be threatened by a lack of supply, writes Tim Wickham


The popularity of alternative office formats, like co-working spaces shared between companies, is on the rise. So is a prevalence of high-tech smart offices and flexible working patterns offered by companies in response to concerns about employee mental health and wellbeing.


Brexit uncertainty and the ability to attract inward investment are putting a degree of pressure on the local market. The popularity of out-of-town office parks continues, while refurbished office space is drawing companies back to town centres. A huge opportunity to attract more businesses to the Thames Valley, particularly Reading, Maidenhead and Slough, should arrive when the Elizabeth Line finally opens.


Market activity


The national commercial property market is “fairly sluggish” according to the Construction Index, although it reports that for the second year running the UK’s top 20 fit-out specialists prospered. Regionally speaking, Lambert Smith Hampton (LSH)’s Thames Valley & South East Market Report 2019 found that in the south new-build developments were coming on stream as the existing supply shrinks.


Knight Frank points to three underlining causes for a shortage of office space: supply is low, the development pipeline is weak and demand is robust. The firm reports that development activity in the South East fell to 840,000 sq ft of speculative space delivered in 2018, compared with 2.4 million sq ft in the previous year.


Michael Potter, managing director of office interior design and construction specialist Curve Workplaces, finds the fit-out market with both landlords and occupiers “fairly buoyant”, despite political and economic uncertainty.


Investment challenge


On the investment front, activity picked up in the second quarter of 2019, according to global real estate services company Collier International. This was driven, in part, by vendors looking to take advantage of the market ahead of Brexit. Collier notes that financial institutions have been actively selling but largely holding back on buying, for now at least.


Changing use of space


Collaborative working, agile working, flexible working and social spaces are part of the growing co-working trend. “Within the occupier market, we are seeing a greater demand for these spaces with agile working, informal meeting, collaboration, breakout and social zones being very much


THE BUSINESS MAGAZINE – NOVEMBER/DECEMBER 2019 Employee focus


Employees are increasingly important in fit-out considerations. Curve’s Potter said: “Cost is always a key driver but creativity and the return on human capital is also high on the list. Companies want to give back to employees through better offices, leading to better productivity, staff retention and wellbeing. The office design debate continues to progress and clients are certainly prepared to look at different ways of working, providing it is pragmatic and evidence based.” He added: “The property industry continues to evolve with a number of our landlord clients looking at providing flexibility for prospective tenants and enhanced common areas.”


Flexi-leasing trend


Nick Coote, director at LSH, identified flexi-leasing as another new trend affecting the office fit-out market. Here, a third party takes the conventional landlord lease, usually for one to five years, then fits out and furnishes the offices, for a specific corporate occupier. The offices are then sublet to that tenant on an all-inclusive basis lease.


“The flexi-lease third party takes on all the capital expenditure (capex) so the occupier’s costs are only operational expenditure (opex),” he said. “That’s quite an attractive model for some businesses and this will become an increasing part of the market dynamic.”


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part of the design brief,” said Colin Allan, managing director at office design and fit-out specialists Morgan Lovell. “In addition, technology has a huge part to play in enabling these working patterns.”


He added: “Morgan Lovell is working with many landlords of grade A stock who are adapting their product to support demand for co-working. They are doing this by providing meeting areas, cafés, breakout and other amenity provisions to make their properties more attractive to prospective and existing tenants.”


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