A JLL annual central London offices seminar has highlighted the strength of the capital’s office market amid political and economic uncertainty, underlining its continued pull to both investors and occupiers. Central London has seen sustained levels of both leasing and investment activity so far in 2018 and corporate property consultant
Paul Casebourne, a leading expert in materials handling, has warned of the impact of Brexit on the industry. He runs the Materials Handling Hub and believes that the industry has been forgotten as one of the potential casualties of the UK leaving Europe. He claims the industry is already suffering
U.K. occupiers negotiated shorter leases or more flexible long-term tenancy commitments in face of Brexit uncertainties and sluggish economic growth, according to the annual UK Lease Events Review compiled by MSCI Inc. (NYSE: MSCI), a leading provider of research-based indexes and analytics. MSCI’s research, sponsored by BNP Paribas Real Estate
Increased order books for UK contractors haven’t defeated Brexit uncertainty, with high input costs fuelling fears of a subdued and cooling market for the next 12 months, according to the latest quarterly analysis from leading professional services company, Turner & Townsend. The consultancy’s UK market intelligence report finds that order
The building and construction industry reflects changes associated with modern technologies. While artisans and similar experts continue to use the same practices embraced for decades, the fact of the matter is that “business as usual” now appears to be a somewhat outdated term. The rise of the Internet and e-commerce
In nearly six months’ time, on 29 March 2019 at 11pm UK-time to be more exact, the Brexit is expected to happen and the UK will leave the EU. The construction industry has already started to feel the impact of Brexit, and has ongoing concerns about, amongst other things, skill
The first concrete look into how the UK market has performed on the two-year anniversary of the country’s decision to leave the EU has been provided by the latest UK HPI release of property price data for June. With the headlines showing house price growth is at a five year
The Construction Leaders Club, an organisation focused on business growth, is planning to run a series of workshops aimed at firms in the sector that wish to become more ‘Brexit ready’. It has created a framework to help businesses leave the fear of Brexit behind and plan for future growth
Research has shown that more than 80% of workers in the construction industry feel that Brexit will have a damaging impact on the UK’s industry and could stop high-profile government infrastructure projects being completed. A new study carried out by Researchers at Birmingham City University has been looking into the
With the General election looming, and votes taking place on the 8th June, the political parties are having one last push for votes from the public. As part of the manifesto, all of the main political parties have released plans for climate change. The election was first announced in order
A JLL annual central London offices seminar has highlighted the strength of the capital’s office market amid political and economic uncertainty, underlining its continued pull to both investors and occupiers. Central London has seen sustained levels of both leasing and investment activity so far in 2018 and corporate property consultant JLL anticipates that the final numbers will match, if not exceed those recorded in 2017. £12.2 billion of central London offices have been traded in the first three quarters of 2018 following a strong Q3 performance where £4.3 billion of transactions were recorded. These latest year-to-date figures are only 6 per cent down on the corresponding period for 2017, a year that saw record investment volumes of £17.7 billion. Currently, £4 billion of assets are identified as under offer and another £4 billion of stock on the market and although this suggests that activity towards the end of the year will remain strong, it also highlights the lack of investment opportunities compared with the same period of 2017 when £16 billion was available. Take-up of offices across central London reached 8.3 million square feet at the end of Q3 2018, with 3.1 million sq ft leased in the West End and 4.5m sq ft in the City. Active demand remains well above the 10-year average, with over 9 million sq ft of enquiries currently searching for space – with demand spread across the occupier spectrum. Looking towards the transition at Brexit, and especially in the event of ‘no deal’, the leasing market could become relatively subdued as occupiers reconsider embarking on any new commitments in the short term. This will be relatively mild, however, as most demand is driven by unavoidable lease events rather than expansion, says JLL. Julian Sandbach, head of Central London Capital Markets at JLL, said: “At the beginning of the year it seemed unlikely that investment volumes would reach similar levels to the bumper numbers we saw in 2017, and now it looks possible that they could even be surpassed. Despite the degree of uncertainty around the outcome of Brexit, London continues to attract significant levels of overseas capital who continue to target prime assets. “As the record levels of foreign capital demonstrate the majority of international investors feel that whilst London is subject to some short-term uncertainty, the long-term prospects for London as a global gateway city with a secure investment platform, underpinned by the long-term commitments of occupiers, remain unchanged.”
Paul Casebourne, a leading expert in materials handling, has warned of the impact of Brexit on the industry. He runs the Materials Handling Hub and believes that the industry has been forgotten as one of the potential casualties of the UK leaving Europe. He claims the industry is already suffering as a result of the uncertainty about the country’s relationship with the EU. The materials handling industry currently accounts for some of the biggest imports and exports in the UK, with machinery and vehicles accounting for a combined worth of £55 billions. “The UK currently benefits from the free movement of goods within the EU. This means imports from other EU member states have no import duties, taxes or customs clearance,” he said. “More to the point the harmonisation of engineering standards requires representations if we are to keep up with international projects. We currently have EU rights to be included in tenders within the EU, I have heard of no plans to make up ground in this respect. Forty years of work in the balance and not a word of comfort from the political structure,” Paul continued. The expert also expressed his concern on the situation in the UK around export and import duties. “Following Brexit, the UK will be back to custom clearing its EU imports as well as paying taxes and import duties on them and it’s possible that some goods will require an import license after Brexit,” he said. Although many industries have expressed their concern about what Brexit means now nobody seems to have looked at the impact this will have on the materials handling industry. Mr Casebourne, who has worked in the industry for more than 40 years and supplies equipment to a range of industries and also creates bespoke solutions, added that “we’ve already seen a number of big projects put on hold and people are reluctant to invest in new equipment.” “The whole situation really is intolerable at the moment while we are neither in or out. The UK has launched itself headlong into a 20-year project with no plan B, in fact without any plans at all whilst still handcuffed to the EU, powerless to put the plans in place that we need to get on with investing in our future,” he concluded.
U.K. occupiers negotiated shorter leases or more flexible long-term tenancy commitments in face of Brexit uncertainties and sluggish economic growth, according to the annual UK Lease Events Review compiled by MSCI Inc. (NYSE: MSCI), a leading provider of research-based indexes and analytics. MSCI’s research, sponsored by BNP Paribas Real Estate and the British Property Federation, showed that new leases with a duration of less than five years accounted for 42.1% of new tenancy agreements signed to the end of December 2017. That compared with a 39.4% share for the same period a year earlier. The shift to shorter new leases reversed the trend since 2011, in which occupiers increasingly signed medium-term leases. MSCI’s latest findings highlighted that the proportion of new signed leases with a duration of five to nine years declined to 36.9% from 39.1% a year earlier. This came as exports and business investment slowed against a backdrop of uncertainty over the outcome of the U.K.’s negotiations to leave the European Union. The average lease term was unchanged by the shift at 7.1 years, the study showed. Will Robson, Executive Director, MSCI, said: “Many businesses seemed to be looking for flexibility when they leased space, so they are best placed to adapt to the fast-moving environment. For instance, risks such as rising inflation and prospects of higher interest rates as the Bank of England ‘normalized’ monetary policy meant that some occupiers may have wanted room to maneuver and adapt to business conditions.” When MSCI reviewed the new leases data by weighting it according to the size of contracted rent, this revealed that large tenants were increasingly signing short or very long leases. This was particularly the case in the retail and office sectors, where average lease lengths declined by 12 and 15 months respectively. Occupiers with large estates of rented space typically favor longer leases because it allows them to capitalize the cost of installing themselves in new premises. The weighted data show that leases of one to four years accounted for 22.2% of new tenancies in the first half, up from 16.9% a year earlier. Meanwhile, leases of 20 years or more represented a 17.9% share, or a 3.9 percentage point increase from a year earlier. The proportions for all other new lease term brackets declined. MSCI’s analysis of 2017 data found that 28.1% of leases of more than 21 years had “break” clauses in their rental agreements that allow the tenant to vacate the property they are occupying. There has been a steady rise from a 15.5% proportion for these long-term leases in 2009, highlighting how occupiers increasingly built in flexibility when they signed very long-term rental commitments. Break clauses were included in 38.5% of leases as of the end of the first half, MSCI observed, noting the increase from a 22.7% proportion in 2007, or shortly before the escalation of the Global Financial Crisis. While these clauses were exercised in about one in five leases in 2017, there were significantly higher levels of break clause exercise in London’s West End and the City of London office markets as well as in the industrial sector. Andy Martin, UK Chief Executive, BNP Paribas Real Estate, said: “In a world that it is ever more difficult to predict, the ability to align property horizons to operational horizons becomes paramount, and macro drivers including demographics, technology, and globalisation have resulted in many companies seeking flexibility. It is therefore not surprising to see the proportion of leases shorter than five years increase, a reversal on 2017, while leases between five and nine years have declined. For larger tenants, stability is increasingly important and the longest leases again increased in 2018, highlighting that the leasing market is becoming ever more polarised.” At lease expiry, just 32% of tenants chose to renew their leases and in 61% of these cases their rents rose. MSCI also found that for 65% of new leases rents were either the same or higher than before. The levels of rent free incentives granted to tenants by landlords remained stable from the previous year, MSCI found. Higher rents were most prevalent in the industrial sector and the Central London office markets, while only 28% of new leases in the retail sector registered higher rents, its study showed. The steady decline in tenant default rates seen since 2012 continued and fell to 2.3% of all tenancies in 2017, or the lowest level since 2007. Ian Fletcher, Director of Real Estate Policy, British Property Federation, said: “”The commercial lettings market is proving resilient in the face of domestic and Brexit turbulence. A lot of short lets negotiated in the aftermath of the recession are coming up for renewal and providing rental growth for the time-being. Occupiers, however, remain cautious and this is reflected in use of short leases and high incidence of break clauses. This survey is relatively positive on tenant defaults, but doesn’t pick up the spate of retail CVAs in the retail sector this year. The breakdown of the various parts of the retail sector provides glimpses of the significant structural changes affecting retail, and landlords adapting to those.” MSCI compiled the study from a sample of 89,000 existing leases in the IPD UK Annual and Quarterly Property Universe as well as more than 9,300 new leases.
Increased order books for UK contractors haven’t defeated Brexit uncertainty, with high input costs fuelling fears of a subdued and cooling market for the next 12 months, according to the latest quarterly analysis from leading professional services company, Turner & Townsend. The consultancy’s UK market intelligence report finds that order books have increased by 23.4% in the current financial year (2018-19) while contractors indicate that order books for the next financial year (2019-20) are now 17.5% fuller than they were in Q1. However, contractors report that input costs remain stubbornly high and the company’s price data reveals that contractors expect the cost of a representative basket of construction materials to rise by 5.3% in the coming year. The report, which takes the temperature of the industry’s front line, found that in Q2 more than half of the UK contractors surveyed felt the market will continue to cool over the next 12 months. “While there have been some high-profile examples of financial sector giants swapping the City for the Liffey, for now the exodus remains more threat than reality. Clearly it is incorrect to suggest that the interplay between the two cities is a zero-sum game, and that Dublin’s market is heating up in direct inverse proportion to London’s cooling,” said Paul Connolly, UK Managing Director of cost management at Turner & Townsend. Outside of the UK but less than 300 miles from London, Dublin’s construction market is in the midst of a full-scale boom, with bullish sentiment and strong client demand driving up tender prices at well over double the rate seen in the UK capital. Surveyed contractors forecast that tender prices in Dublin will rise by an average of 6.3% in 2018, while those in London forecast a modest 2.5% increase. “However, a surge in relocation interest has undoubtedly turbo-charged Dublin’s construction market, and it now risks overheating with the city facing the prospect of acute skills shortages and rapid price inflation. While Brexit itself is likely to impact on both sides of the Irish Sea, for now the uncertainty over the nature of the UK departure from the EU is taking a far greater toll in London than in Dublin,” added Paul. The gulf in construction fortunes between the two cities is most stark in terms of market sentiment. Nearly two thirds (63.6%) of contractors in Dublin report that their market is improving and getting warmer compared to just 21.1% of respondents in London. 26.8 percent of contractors expect to see the London market cool. “In challenging markets like London, clients must face down multiple, fast-moving threats with equally agile procurement and project management strategies. The most obvious issue to be confronted is supply chain strain. Clients must remain vigilant and in practical terms, this means re-running credit checks and challenging suppliers on their ability to continue delivering, while also seeking to understand and allay their concerns,” concluded Paul.
The building and construction industry reflects changes associated with modern technologies. While artisans and similar experts continue to use the same practices embraced for decades, the fact of the matter is that “business as usual” now appears to be a somewhat outdated term. The rise of the Internet and e-commerce strategies in particular are transforming the ways in which B2B and B2C relations are occurring. This is important for owners to appreciate, as such systems are able to provide them with a competitive edge if they are employed in the correct manner. Let’s take a look at what innovations have already taken place as well as what 2019 could have in store. E-Commerce Trends: Better, Smarter and Faster The first major point to appreciate is that many e-commerce systems are now able to exhibit a sense of flexibility that would have been nearly impossible to imagine in the past. They can be customised to suit the needs of the end user and therefore, common tasks such as invoicing and tracking projects have become much more streamlined. This sense of efficiency translates directly to the customer, as projects can be completed with a greater level of clarity and oversight. The utilities and tools at the disposal of the end user have likewise enjoyed a higher degree of specialisation. As these packages are modular, stakeholders and project managers can choose those which are best suited for their needs. Some examples include: The ability to accept multiple forms of payment. Instantaneous invoicing and inventory control. Complete mobile integration. Immediate communication with warehouses and similar avenues of fulfilment. In other words, those who are involved in the construction industry are now provided with the ability to work smart as opposed to hard. 2019: Embracing an International Presence The main question is what 2019 might have in store. All eyes seem to be pointing to the increased prevalence of the modern international ecommerce platform. This only stands to reason, as many construction companies are now beginning to look past traditional geographic borders when plying their services. Such a methodology will also provide a greater degree of stability when compared to relying upon the whims of a local market economy (as well as the looming Brexit worries). Thus, e-commerce applications which have the capability of dealing with cross-border demands are predicted to take centre stage in 2019. This is great news for the average business owner, as such bundles have been designed with a user-friendly nature. It should also be mentioned that they are equipped with a number of advanced tools and applications. Some examples include:¨ International POS systems. Automatic currency and taxation converters. More than 100 payment gateways. Dual content delivery networks for greater reliability. While some of these options might not be applicable when referring to locally based construction companies, there is no doubt that larger firms will be able to leverage the many benefits that they have to offer.
In nearly six months’ time, on 29 March 2019 at 11pm UK-time to be more exact, the Brexit is expected to happen and the UK will leave the EU. The construction industry has already started to feel the impact of Brexit, and has ongoing concerns about, amongst other things, skill and labour shortages, the increasing price of materials, potential import and export tariffs. Another area of concern for the construction industry has been how the system of advertising UK contracts for works, goods and services to EU companies would work post-Brexit and how businesses in the UK construction industry would be able to continue to bid for work, goods and services in Europe. This is important because many UK construction and consultancy businesses benefit and need to continue to benefit from smooth and open working relationships with EU businesses. The government’s position While the government continues to negotiate with the EU, in the hope of reaching agreement on a number of key points in the next few months, it is also starting to prepare for a ‘no-deal Brexit’. As part of that, a couple of weeks ago the UK Cabinet Office released guidance entitled ‘Accessing public sector contracts if there’s no Brexit deal’ which sets out how works, goods and services can continue to be accessed across the UK and EU in the event of the UK leaving the EU without an agreement in place. The current system At the moment, UK public bodies and authorities can procure certain works, goods and services for construction projects, including from EU businesses, by advertising them on the Official Journal of the European Union (OJEU) via Tenders Electronic Daily (TED). Equally, UK contractors, consultants, manufacturers and other construction businesses can bid to provide works, goods and services to EU public bodies through OJEU via TED. This means that, for example, a UK public authority procuring specialist offshore trenching and vessel services for a government-funded offshore renewables project can receive tenders from specialist construction companies throughout the EU. It also means that UK companies, for example a UK architectural business, can tender for a commission to design a high profile development project in Spain on the same basis as companies based in other EU member states. But post-Brexit, without a deal, this position would change. The government’s guidance There are two key messages in the government’s guidance ‘Accessing public sector contracts if there’s no Brexit deal’: First, the UK is aiming to accede to the World Trade Organization (WTO) Agreement on Government Procurement (GPA). The GPA is an international trade deal that the UK currently participates in by virtue of its EU membership, but in a No-Deal Brexit world the UK will need to become a member itself. Whilst this is not a new position it does confirm that there has been no change to the government’s position on the need to seek GPA membership. Second, the UK will develop a UK version of OJEU / TED, which it refers to as ‘a replacement UK- specific e-notification service’. The guidance states that: UK-based contract opportunities would no longer be advertised to the EU on OJEU / TED and would instead be advertised on the new replacement UK-specific free-to-use e-notification service This UK e-notification service will be available from ‘Exit day’ The requirement to advertise and ability to access other UK domestic systems will remain eg on Contracts Finder, MOD Defence Contracts Online, Public Contracts Scotland, Sell2Wales and eTendersNI UK businesses who wish to tender or bid for EU contract opportunities may continue to do so via OJEU / TED and To enable the above, some changes to how the current procurement rules operate may be necessary, and these will be made by amending existing UK legislation. The government has also said that further information will be provided nearer to the Brexit date. So, has the government provided clarity? In part, yes. The government has at least given some insight into its thinking about how works, goods and services can be advertised and procured across the EU in the event of a No-Deal Brexit. However, there is very little detail around how this will work in practice. In particular, while the guidance says that “Suppliers who wish to access contract opportunities from the EU may continue to do so via OJEU/TED”, it is not clear whether this position would be agreed to by the EU or whether they would have to access OJEU/TED as third country participants. UK public authorities, construction companies, construction industry professionals and other construction industry businesses may also be concerned that, during a period in which they dealing with other challenges that may arise for their businesses due to Brexit (such as skill and labour shortages), they will potentially also have to familiarise themselves with a new UK e-notification service. One thing is clear though, with no agreement yet reached with the EU, and with the Brexit date looming in a matter of months, the government should be working hard behind the scenes to flesh out its guidance, to provide certainty for UK public authorities and the construction industry before 29 March. We would hope to hear more on this by the end of this year.
The first concrete look into how the UK market has performed on the two-year anniversary of the country’s decision to leave the EU has been provided by the latest UK HPI release of property price data for June. With the headlines showing house price growth is at a five year low across the UK, leading Hybrid Estate Agent, Emoov.co.uk, has crunched the numbers to see where has suffered and where has shrugged off the wider market slowdown to enjoy strong price growth. The UK Nationwide, prices are up 7.3% since the vote, with England and Scotland both enjoying the same increase, while price growth in Wales trails slightly at 7.1% and has hit 7.7% in Northern Ireland. Regionally, the West and East Midlands are ahead of the rest with price growth hitting double-digit figures in the last year, 10.9% and 10.3% respectively. The North East has suffered the most with prices increasing by just 0.3% in the last two years. The high cost of living in the capital has also taken its toll with London the second worst performer at 1.8%. This is largely due to central London and when split, Inner London price growth falls further to 1.2% while Outer London picks up the pace at 4.1%. The Best Across the UK it’s the Orkney and Shetland Islands that have enjoyed the largest growth since Brexit, up a huge 36.1% in the Orkney’s and 19.9% in the Shetlands. England compiles the rest of the top 10 largest increases with Thanet (18.8%), Harborough (18.4%), Kettering (18.4%), Tendring (17.8%), Maldon (17.7%), Sandwell (17.2%), Blaby (17.2%) and North Norfolk (17.0%). The Worst The City of London has been by far the worst area of the UK for property price growth with a drop of -21.9%. However, with an average house price of over £900,000, homeowners aren’t completely out of pocket. The City of Aberdeen is the second worst and only other area to see a double-digit drop at -12.3%. With an average house price of £1.2 million, Kensington and Chelsea has also seen a notable drop at -7.4%, with the Western Isles (-6.2%), the City of Westminster (-6.0%), Three Rivers (-5.7%), wider Aberdeenshire (-5.4%), Hammersmith and Fulham (-4.4%), Wandsworth (-2.9%) and Southwark (-2.9%) all seeing some of the largest declines in price growth.
The Construction Leaders Club, an organisation focused on business growth, is planning to run a series of workshops aimed at firms in the sector that wish to become more ‘Brexit ready’. It has created a framework to help businesses leave the fear of Brexit behind and plan for future growth and development. These workshops will take place in the Nottinghamshire/Derbyshire area starting in February. “Small business owners don’t always have the time or resources to effectively lead and manage seismic changes in the marketplace and their business. We are heading into uncharted waters as the UK prepares to leave the European Union, and it’s vital that small and medium-sized businesses do what they can to prepare as much as possible for this,” said Terry O’Mahony who runs CLC. The organisation’s new mission is to help these business leaders and managers to be more confident and not focus on what the Brexit could or could not bring. Terry and Peter Jubb, a business development and marketing consultant, will run the workshops held at Risley HALL Hotel, Risley in Derbyshire, near junction 25 of the M1, starting on the 9th of February. “In just one workshop, we will be offering advice on how to re-engineer businesses, accelerate profitability, reduce exposure to commercial risk and to leveraging every opportunity open to business leaders,” explained Terry. “We welcome small business owners, senior decision makers and leaders who want to develop their business and teams.” The first half of the workshop will run from 9am to noon and it will focus on the importance of being Brexit ready. It will offer guidance to businesses on how to fully understand their situation, how to identify and evaluate the best way forward, and how to create an effective plan. The Construction Leaders Club is believed to be the only business of its kind to be awarded the new Chartered Building Consultancy status. Founded four years ago by Terry O’Mahony, it offers networking and business growth advice to businesses and individuals related to the UK construction industry.
Research has shown that more than 80% of workers in the construction industry feel that Brexit will have a damaging impact on the UK’s industry and could stop high-profile government infrastructure projects being completed. A new study carried out by Researchers at Birmingham City University has been looking into the views of those working in the construction industry to gage whether they believe that jobs, projects and the industry as a whole will be affected by Britain’s decision to leave the European Union. The study has shown that 88% of the workers felt that the UK relied upon the EU as a source of skilled labour. 82% felt that by leaving the EU, there would be a collapse of a number of infrastructure projects. Because of the demand for skilled workers in the industry, and the reliance upon the EU to supply the workers to meet the UK’s needs, 86% of the workers spoken to as a part of this survey said that a rise in the demand for skilled workers is expected. In line with these responses, 92% of construction workers thought that the freedom of movement would be beneficial to the construction industry in the UK. These responses have been collected from more than 50 businesses in the industry who gave feedback for the research project. One of the respondents in the research said that Brexit will make the current skills crisis significantly more intense and could then have a knock on effect on the costs of labour and therefore the costs of projects. The research carried out by the team at Birmingham City University is titled ‘Brexit: measuring the impact upon skilled labour in the UK construction industry’. The research as first formed as a part of a final year Honours Research Project (Dissertation). Since being finished, the research has been published in a leading scientific peer-reviewed research journal, the International Journal of Building Pathology and Adaptation. The research looks into a topical and historically unprecedented situation that is, at the moment looming over the UK construction industry. The paper also includes a number of recommendations to ease the strain on the number of skilled workers. These suggestions include retaining the free movement of workers by remaining in the European Economic Area, keeping current workers in the industry by offering increased wages and guaranteed overtime as well as reducing the physical exertion needed with the increased use of technology.
With the General election looming, and votes taking place on the 8th June, the political parties are having one last push for votes from the public. As part of the manifesto, all of the main political parties have released plans for climate change. The election was first announced in order to stop the struggle that the Prime Minister claims she was facing while carrying out the plans for Brexit. However throughout the campaign the plans to improve or increase the sustainability of the country haven’t been a vital part of the campaign process. Despite this, all of the main political parties have announced some policies in regards to climate change and with the signing of the Paris Agreement being signed, the ability of the country to meet the restrictions that have been applied have been a consideration throughout the election campaign. The Conservative party has pledged as a part of their manifesto that they will be working to tackle the air quality in the Country. This aim has been announced because of the High Court action that has taken place against the current Government because of the illegal levels of air pollution that have been recorded in some populated areas. The party is expected to release a plan that will span 25 years and will improve the company’s environment while the UK leave the European Union. In terms of the construction and building sector, the Conservative want to create a programme that will help larger companies become more green. The Labour party also looks at cleaner air, and will also look to put energy distribution back into the public sector. The Party will be working on protecting the environmental protection that have been put in place through Brexit and improve the energy efficiency regulations that are expected by landlords in order to help renters save money on their bills. The political party are also wanting to support nuclear projects and will aim to make sure 60% of all the energy used in the UK comes from renewable sources or through processes that do not use carbon. We will have to wait and see how how the winning party’s manifesto gets put into action over the course of the next few weeks.
