In addition, it also says that that time-lags associated with the development cycle mean that, as the occupier market returns, there is likely to be a shortage of Grade-A supply in some markets. As developers and landlords seek a more feasible approach to deliver office stock, conditions have pushed the need to consider refurbishment further up the agenda.
Ian Parker, a Director within National Offices at GVA Grimley comments: “With development finance expected to be in short supply for an extended period, refurbishment needs to be a far greater consideration for landlords.
“Lease terms are becoming shorter and more flexible as landlords seek short-term assurances and occupiers dare not commit to long-term leases while the outlook remains uncertain. This means the tenant turnover rate will increase significantly, raising the need to refurbish.
He continued: “To add to this, the increasing demands of the Government and occupiers, particularly with regard to energy efficiency, will force landlords to re-assess their portfolios now more than ever, in order to ensure their buildings remain an attractive investment.”
Gordon Hewling, Director of Building at GVA Grimley, who specialises in office refurbishment projects, believes that there are a number of areas in which refurbishment can present benefits both in terms of cost savings and efficiency when compared with redevelopment:
“Refurbishment is a quicker and cheaper means of restoring second hand space to grade A specification and is likely to see faster progress in obtaining statutory approvals. Furthermore, there will usually be lower demolition and waste disposal costs and the retaining and recycling of existing material can minimise building material costs.
“In addition, phased refurbishment may also present an opportunity to operate a business in one part of the building while the other undergoes improvements, thereby perpetuating income for the owner. Refurbishment is often a quicker process also reducing the void period. It also offers one of the highest levels of tax relief available with potentially 60 – 80% of a projects total expenditure qualifying. BREEAM credits will be awarded to schemes where existing structures, building materials and land are re-used or recycled.”
Looking further ahead, as office occupiers reduce the amount of energy they consume as a result of rising energy costs the attention of regulators will turn to the issue of embodied energy conservation, further enhancing the appeal of refurbishment over new-build.
“There is no one-size-fits-all strategy as substantial risks and technological barriers may, in some cases, present new-build as the more efficient option” says Hewling. “For example, constraints arising from the form and orientation of the existing structure and building fabric, increased safety risks, contingency for unforeseen costs and the need for specialist expertise to tackle technical challenges. Therefore, deciding on the most economically sustainable route requires a detailed analysis of costs, risks and benefits.”
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