Office space and tenants' needs

Citation

(1998), "Office space and tenants' needs", Property Management, Vol. 16 No. 2. https://doi.org/10.1108/pm.1998.11316bab.016

Office space and tenants' needs

Office space and tenants' needs

Keywords Occupation, Offices, Property market

One third of all UK office space will fail to meet the needs of business occupiers by the end of 1998, according to the Connaught Report, a new survey investigating the problem of the UK's growing stock of second hand office accommodation. "Refurbishment Issues in the Commercial Office Sector 1997/98", produced by the Connaught Group, the refurbishment contractor, in conjunction with the Royal Institution of Chartered Surveyors (RICS), further identifies that 15 per cent of second hand office property is currently lying redundant.

Commenting on the report, RICS President Peter McKendrick says: "In almost every city in the UK there is a huge stock of empty offices which, in their present state, have no value or purpose for British business ­ ten million square feet in central London alone will never be used again. Unless owners are willing to modernise or consider changing the use of sub-standard property, they will remain empty. What is more, the volume of obsolete stock is increasing all the time."

Mark Tincknell, Managing Director, Connaught Group, says: "Despite the UK's huge amount of empty office space and the prospect of a third of all office space becoming sub-standard by the end of next year, property owners are deterred from taking long-term corrective measures because they believe pay-back times on comprehensive refurbishment costs are too long. At present, they are currently more inclined to refurbish superficially, absorbing maintenance costs into day-to-day maintenance budgets.

"In fact, the Connaught Report shows that comprehensive refurbishment can increase letting values by as much as 30 per cent, and be owners' best long-term strategy to avoid spiralling maintenance budgets and ensure the sustainability of their properties' capital and rental values in the future," he continues. "We need to look for ways to encourage refurbishment, and the Connaught Report suggests that some form of tax incentive would be an effective solution for the Treasury to explore."

The Connaught Report, which is based on the views of a random sample of property owners and major tenants as well as advisers drawn from RICS's 90,000 members, also identifies an increasing trend towards shorter leases, reflecting occupiers' unwillingness to commit themselves to longer contracts. Sixty-one per cent of respondents estimate current lease lengths to be an average of five years or less and 38 per cent predict future leases to become shorter still. As more second hand office property fails to meet tenants' requirements and leases expire more frequently, owners of sub-standard, unrefurbished property will have little guarantee of securing future tenants.

It also finds that tenants place a higher priority on a central location when choosing office property than do owners and advisers, meaning that the industry may be over-estimating the long-term threat of out-of-town developments. In addition, the report suggests that owners and advisers may need to reassess the priorities that major tenants place on different decision-making criteria when choosing office property, most noticeably the importance of the indoor working environment and employee considerations. In particular, 97 per cent of tenants see the indoor working environment as an important factor as opposed to only 79 per cent of owners.

Copies of the Connaught Report are available from RICS priced £20+p&p on Tel: 0171 222 7000.

For further information, please contact Lynda Webb, Ash Associates, 112 St Martins Lane, London WC2N 4AZ, Tel: 0171 240 6005; Fax: 0171 240 8005. E-mail Lynda@ ash-associates.co.uk