White Collar Factories – The potential for new offices
Reading an article in Building Magazine about plans by Derwent London to potentially build what by any standards is a ‘brand new, ultra cheap office building’ made me chat to my agency colleagues on whether they thought the concept being put forward would potentially be rolled out.
The Derwent London proposal is to provide spacious, bright office interiors with low rents, low running costs, simple servicing and basic interiors. This solution will keep costs to a minimum – Derwent are targeting a build cost of circa £180 per sq. m. – whilst providing good quality space. The inspiration for this concept came from the success of disposing of Derwent’s existing portfolio, which consisted mainly of converted 20th century industrial buildings.
Speculative development nationwide has stalled in all sectors, but particularly offices due to the substantial drop in office rentals since the crash, with high build costs outweighing returns. Should this proposal prove successful, it will not only provide a boost to the economy through speculative development but may also provide an alternative option for owners of vacant industrial space, providing they are prepared to spend the money to convert the properties.
It is, however, not all good news. Should this experiment prove successful it will provide yet another issue for owners of existing office accommodation by further adding to the oversupply. This may lead many to look down the route of the office to residential conversion through the permitted development rights recently introduced, however not all properties have the potential for residential conversion.
Regardless, the property world waits to see the outcome of this experiment, however, should it succeed there will still be the question of whether this is feasible outside of the relatively recession proof London. Landlords in the regions have already reduced rents to a level whereby even this relatively cheap alternative may still not be viable.
If you need help or advice on conversion and the subsequent sale and letting potential of any buildings please contact one of the agency team at Harris Lamb.