News/Blog

NO NEW BUILDINGS DUE PAST 2025

Works will continue this year and next on office buildings already on-site, but there will be little or no new starts in the near term. Inflated construction and finance costs (albeit likely to reduce this year) as well as a high headline vacancy rate, reduced market activity and macro-economic conditions will be the key risk factors holding back development. As of now, no new buildings are due in 2026 and beyond. This brings with it future risks, particularly in three to five years’ time when there will not be enough A rated / zero-emission buildings to meet the demand arising from occupiers’ 2030 ESG commitments (or 2027 commitments by some). Developers, investors and funders need to keep this in mind and not over-correct.

STRANDED ASSETS

Sustainability is an ever-increasing consideration across all parts of the built environment, but none more so than the office sector – both from a regulatory standpoint but also from a moral and wellbeing perspective. Various European and domestic policies will continue to influence how properties are funded and occupied. With offices, it generally makes most financial sense to fully refurbish / rebuild (if permitted due to embodied carbon) older Grade C buildings, and this cost will be reflected in their value. However, it will be a more difficult situation with Grade B buildings and there is a realistic fear many will become stranded assets – too modern to justify the high cost of upgrading to A or high B ratings on the BER scale, but also not meeting the sustainability standards required. Certain landlords will carry out the works regardless and accept the cost. Going forward, which party takes responsibility for the M&E systems will become a hotly negotiated point for landlords and tenants, as will the level of service charge.