Eurozone Crisis to Impact Commercial Development
Over 50 million sq.ft. of City office developments could be at risk.
Around 50% of 150 or more projects due to increase total office space in the capital by 2016 could never see the light of day.
But whatΓÇÖs causing this potential development collapse? EC Harris cites elements such as ΓÇÿdiminishing optimismΓÇÖ and lower overall funding availableΓÇª and the Eurozone Crisis.
In a tightly-controlled environment, bombarded with phrases such as ΓÇÿausterity measuresΓÇÖ, ΓÇÿmassive pay cutsΓÇÖ and ΓÇÿbleak outlookΓÇÖ, it is suggested that gun-shy businesses will be more inclined to stay put.
While this will potentially make a dent in the projected 25-70 million sq.ft. worth of office lease set to expire before 2017, itΓÇÖs unlikely to do much for projects still in the planning.
Will the realisation of iconic developments, once designed to meet demand, eventually be threatened by fear of a global backslide into recession?
Report author and Head of Commercial Development at EC Harris, Richard Taylor, thinks the danger is exactly that:
ΓÇ£On paper, the development pipeline for London offices shows massive potential and investment. However, in reality the market is very different, with a large number of these projects unlikely to be delivered as they struggle to find pre-lets and external funding.
ΓÇ£To stand a chance for success, projects need to differentiate and create a significant market advantage if they are to maximise their chances of completion.ΓÇ¥
Refurbishments are also recorded to have slowed down in recent times, as the rates of improvement to existing offices reached just 15% of total London developments in the pipeline ΓÇô a figure which drops to 12% in the City.
But itΓÇÖs not just a message of doom and gloom from EC Harris. The company follows up its report with a series of recommendations that could see future office space take-up rally against the recession despite the grim media messaging.
These measures, aimed at commercial property developers in London, include more flexibility to meet user and funding requirements, maintaining competitiveness in a more reserved market, and getting on with the job, as the sooner developments are finalised, the more likely it is that City businesses will be willing to jump ship for a new location just around the corner.