Jon Silversides, partner in Carter Jonas’ Oxford commercial agency, discusses findings from the firm’s latest report which suggest some of the UK’s major cities could find 90 per cent of their office buildings unlettable by 2030.
A report from our research team illustrates the huge volume of UK office stock that, without investment, may become unfit for purpose.
Analysing how sustainable and energy efficient the UK’s office stock is, and to what extent it meets the requirements of the workforce today and in the future, the results highlight the challenges facing many commercial property owners, particularly of older or low-quality space.
Using 110,000 office records, our team analysed four key office quality metrics: EPC ratings, BREEAM assessment, office-grade classification, and age of office stock, looking at the picture nationally and in 12 major UK office markets.
Approximately 55 per cent of existing office inventory in the UK by floorspace is more than 30 years old and nearly a quarter was originally constructed before 1950.
Whilst this is not necessarily negative, it certainly poses challenges. In many cases of course, repurposing older office space can reduce the need for new construction and promote sustainable urban development.
But, moving forward, much of the relevance of this stock will be defined by how proactive landlords and developers are in responding to legislation and the requirements of the modern workforce.
Our team classified the UK’s office buildings into classes 1-3, class 1 being the highest quality offices and class 3 being the poorest. These are used to differentiate buildings by quality, based on key factors such as location, age, building quality, amenities, and rental value.
Class 1 space accounts for 28 per cent of the total UK stock and is where most occupier demand is now focussed.
This means nearly three-quarters of the UK’s stock is not sufficiently high quality to attract a broad range of occupiers. Across the 12 cities analysed, Oxford has some of the most low-quality office space (class 3) as a percentage of the total office stock, at 28 per cent.
Office properties within EPC bands F and G account for 17.2 per cent of all offices in Great Britain, meaning that nearly a fifth of all office buildings potentially became unlettable from April 1, 2023, unless remedial action has been taken.
In reality, the figure will be lower as exemptions apply to certain properties. Additionally, some spaces may be in the process of being upgraded and re-assessed or may be vacant and awaiting a change of use.
Given the proposed tightening of the MEES regulation, a substantial proportion of office buildings will be unlettable by 2027 if upgrades are not carried out. Only 31.6 per cent of GB’s stock is band C or better, the minimum proposed MEES standard by 2027.
A mere 8.3 per cent of the stock would satisfy the proposed minimum MEES requirement of EPC band B from 2030.
There is a notable difference between the 12 locations analysed. Cities including Glasgow, Edinburgh, Birmingham and Bristol could find that 70 per cent of their stock will be unlettable by 2027 without capital investment, with this share of properties below the minimum standard potentially increasing to 90 per cent and above in 2030.
Our team then developed an Office Market Sustainability Index, comparing the average sustainability level of stock across the 12 UK office markets, to create an overall ranking. The findings conclude that London is at the forefront of sustainability initiatives and regulations, and it is ranked first among the 12 cities. Oxford sits in sixth place.
Overall, the report serves as a stark reminder as to how, as an industry, we need to encourage targeted strategies to improve sustainability and energy efficiency across our markets.
Whilst daunting, there are opportunities for clever refurbishment and redevelopment choices. A key question will be the extent to which market forces alone will drive this transformation without the need for further Government intervention.
To find out more, or if you would like to read the full research report, please get in touch.
You can download the report at https://www.carterjonas.co.uk/commercial/research/sustainability-uk-office-stock-2023
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