Each time you turn on your TV or listen to the radio Brexit is still one of the main topics being discussed. It’s exactly a year since the UK voted to leave the EU and Brexit (shorthand for the UK’s exit from the EU). A year on the plans to start the process of “leaving” are being discussed and the UK and the EU have begun official talks.
Post Brexit many companies across the UK were left questioning decisions regarding whether to move forward with their office refurbishment plans or put them on hold. Understandably, this is a question many Kent and London companies, are giving voice to especially when an office refurbishment can be a major investment.
In this article we look at the impact on London businesses.
In many cases the arguments put forward by experts and analysts are still somewhat speculative but hopefully after reading this article you will have more information to help guide you in making the right decision for your company.
London, the City For Office Refurbishment Investment
Last year London was named as the best city for investing in office refurbishments. According to JJL who deal in commercial and residential property services, office occupation in central London was on target to hit 11.9 million sq. ft. in 2016. They have been quoted as saying the surge in London office take-up continues “an exceptional run of leasing activity that began in early 2013”.
London office take-up was above 11 million sq. ft. for three consecutive years, making it for the first time confirming the ever increasing popularity of office space in London and a prime target for office refurbishment.
In another study this time by ARCADIS, a leading consultancy in global asset design for natural and built assets, looked at 15 cities across the world and the ROI from refurbishments on buildings more than 20 years old.
London was named as the best city in the world to invest in major office refurbishment and second placed for minor refurbishment.
‘Major refurbishment’ is defined in the study as projects that extend the life of an office space by up to 20 years. ‘Minor refurbishment’ describes aiming to extend the space for up to another 5 years.
For major refurbishment London came top with a return on capital expenditure close to 10% in comparison to second and third placed cities, Warsaw 7.5% and Milan 6%. For minor refurbishment London came in at 8.5%, behind Madrid at 9.6%.
So has Brexit overturned this or are London office refurbishments still a good investment?
A Year On – Is London Office Refurbishment Still A Good Investment?
Now that the dust is starting to settle and we can start to be analyse how Brexit will impact the UK it’s clear there are voices for both sides of the argument.
The first thing to note is that it’s still not completely clear how Brexit will be implemented. The plans to leave the EU are now being discussed and over the next few months those plans should become clearer.
Against London Office Refurbishment
JLL real estate commercial and residential property agents released a briefing on the 12 July 2016 highlighting statistics showing office occupier demand was down in the Q2. JJL believe that demand may remain subdued through the rest of the year and into 2017, as occupiers take stock of Brexit’s implications.
In some cases commercial property deals in London were pulled as companies became concerned that financial services companies might relocate staff elsewhere in Europe after Brexit. In this climate they felt it was wiser to suspend deals until they had a clearer idea of what was likely to happen in the future.
Some experts, including Matt Goulding, Director of Real Estate Securities at CenterSquare, feel that the slowdown in demand for office space and the investment in offices for businesses will continue as businesses who dislike uncertainty decide to put plans temporarily on hold.
For London Office Refurbishment
On the flip side of the argument Charles Curran, principal at Maskells realtors stated “Whilst there is a concern that financial institutions may have to move employees and offices overseas, London will remain the most significant financial centre in Europe and may well have access to the European market through equivalence [a clause that allows financial bodies in non-EU countries to offer select services within the EU]”.
Office demand among smaller businesses appears unaffected by the Brexit vote. London’s small and medium-sized businesses are still taking new offices in spite of uncertainty created by the EU referendum, according to Workspace.
Digby Flower, of Commercial real estate agents Cushman and Wakefield believes that as a consequence of Brexit, “companies will look to cut costs and assess the efficiency of their offices”. Brexit can be seen as an excellent opportunity to reassess current office space with a view to adapting your office design and refurbishing your existing workspace to save money through workplace consultancy and space planning.
Derwent London also announced it has pre-let nearly 85,000 sq. ft. of office space to four new customers at an office scheme currently completing refurbishment in east London. Three of the new deals were signed after the EU referendum.
Indeed, London real estate deals jumped 38% in the week immediately following the referendum, according to Knight Frank, as the lower valuation of the pound created a perfect buying opportunity, particularly for overseas investors.
Most analysts agree it’s too far too soon to tell what the longer term impact of leaving the EU will be on London office space and investment in office refurbishment, especially in the commercial sector where multinational finance and banking firms are still looking at and weighing up their options, however they believe that London office refurbishment is still a good investment opportunity.
In conclusion . . .
The overall outlook for London commercial and property markets seems to be optimistic short-term caution. If you’re a London company and need to refurbish your premises or workspace to make room for expansion then making the right decision as to whether to wait or go ahead should be made in conjunction with your short term and long term requirements and goals and how the markets may be affected.
We have the know how to look at your existing workspace and to suggest new ways of using your office space to greatly improve your office layout and to ensure your workspace is utilised to its full potential. We can advise you how to get the best from the space you have. Call us to discuss your options on 0333 207 0339 or contact us via our contact page.