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17th January 2012
17 January 2012
Blue-chip occupiers have reduced the costs of office accommodation by 15 per cent, according to preliminary analysis by IPD Occupiers.
And average space per person has fallen by an average of 4 per cent annually across all regions in the UK. The average net internal area per person is now around 10 square metres per person.
The IPD Occupiers Blue Chip Office Index tracks how costs and the use of office space are changing. Information is drawn from both IPD's database of UK rents and IPD's occupier benchmarking service.
"Our clients represent some of the largest occupiers in the UK and what we see here is the culmination of aggressive cost control, the move to open-plan working and extensive portfolio rationalisation," said Glenn Corney, IPD global product manager.
Since 2005, total property costs have increased by £23 per square metre - a 1.1 per cent rise annually. This is well below inflation, which would have seen costs rise by almost 3 per cent annually, the report suggests.
Rates have increased by 29 per cent and operating costs, including energy prices and maintenance costs, have gone up by 15 per cent. But this rise is mitigated by falling rents, leading to only a small increase in total property costs.
"With most organisations introducing some form of flexible working, we would expect reduced space demand to continue to be the main lever for cost control, which has wider implications for the UK office market," said Corney.
Rental growth for offices has been largely flat for five years and demand is unlikely to rise given economic uncertainties and poor growth forecasts. Coupled with occupiers requiring less space because of their efficiency strategies, growth of the office sector is unlikely, said Corney.
"Office owners and managers need to take this into account. Incentivisation and active management have already been used to keep tenants, but this latest data shows they may need to do more to let space."
Corney also said he believes offices need to have more efficient and flexible floorplates.
The full report based on more data will be released in July.
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Blue-chip occupiers have reduced the costs of office accommodation by 15 per cent, according to preliminary analysis by IPD Occupiers.
And average space per person has fallen by an average of 4 per cent annually across all regions in the UK. The average net internal area per person is now around 10 square metres per person. The IPD Occupiers Blue Chip Office Index tracks how costs and the use of office space are changing. Information is drawn from both IPD's database of UK rents and IPD's occupier benchmarking service.
"Our clients represent some of the largest occupiers in the UK and what we see here is the culmination of aggressive cost control, the move to open-plan working and extensive portfolio rationalisation," said Glenn Corney, IPD global product manager.
Since 2005, total property costs have increased by £23 per square metre - a 1.1 per cent rise annually. This is well below inflation, which would have seen costs rise by almost 3 per cent annually, the report suggests.
Rates have increased by 29 per cent and operating costs, including energy prices and maintenance costs, have gone up by 15 per cent. But this rise is mitigated by falling rents, leading to only a small increase in total property costs.
"With most organisations introducing some form of flexible working, we would expect reduced space demand to continue to be the main lever for cost control, which has wider implications for the UK office market," said Corney.
Rental growth for offices has been largely flat for five years and demand is unlikely to rise given economic uncertainties and poor growth forecasts. Coupled with occupiers requiring less space because of their efficiency strategies, growth of the office sector is unlikely, said Corney.
"Office owners and managers need to take this into account. Incentivisation and active management have already been used to keep tenants, but this latest data shows they may need to do more to let space."
Corney also said he believes offices need to have more efficient and flexible floorplates.
The full report based on more data will be released in July.
Other news for Tuesday, 17 January 2012
More Green Deal assessors on the wayNew chairman joins Chapco
Occupier efficiencies keep office costs low
BaxterStorey seals a deal with BlackRock
Contracts round-up
FM World blog: Brushing off the small print