Office Market Revival: Contracts Awarded & Construction Ramps Up

There are increasing signs of life in the office market with a rise in the value of contracts awarded and schemes entering the construction cycle.

Glenigan’s construction market research showed that contracts worth a total of £2,125 million were awarded for office projects in the three months to April 2024. This total is 61% up on the previous three months and 40% ahead of the same period in 2023.

Glenigan Economics Director Allan Wilén comments: “This was driven by work on major projects of £100 million or more, which totalled £1,403 million during the period.

This was a 214% increase against the preceding three months and a 401% increase on the previous year.”

Major office contracts awarded in the latest quarter include a £100 million redevelopment of Newcombe House in Westminster, central London (pictured), with JRL subsidiary Midgard lined up for the work (Project ID: 15240927).

Mid-range rise

Overall, office projects starting on site valued at £50 million to £100 million rose by 12% in the previous quarter, but smaller value schemes showed the biggest rise.

A total of £412 million-worth of office projects valued at £20 million to £50 million started on site in this period. This latest total is 127% on a year ago.

Examples of underlying office projects starting on site in the latest quarter range from a £20.5 million refurbishment of the Baltic Exchange in central London (Project ID: 21538327) to a £22.1 million plan for new offices on plots eight and nine at MIRA Technology Park Extension (Project ID: 22353998).

Plans approved

More office schemes continue to secure approval. In the latest quarter, £3.6 billion-worth of office work received the green light from the UK’s planning authorities. This total was 26% up on a year earlier.

Major office schemes granted planning permission in the latest quarter include the £200 million Bermondsey Yards scheme in south London (Project ID: 18374020) and the £150 million London Wall West in the City of London (Project ID: 17172776).

While the combined value of major projects – schemes valued at £100 million or more – securing planning permission fell by 22% compared to the preceding quarter, there was a 25% rise in approvals for underlying work valued below £100 million on a year ago.

Office schemes in this lower value bracket that were approved in the latest quarter include a £33 million proposal at 56-64 Leonard Street in Hackney, East London (Project ID: 10417103), and a £54 million scheme at 1-7 Fountain Street in Belfast (Project ID: 19119037).

Forecast rising

The latest results bear out Glenigan’s earlier predictions for the sector, which forecast a 6% rise in the value of underlying starts this year.

“Changing work patterns will remain an important driver for the sector, supporting a gradual recovery in starts over the next two years as landlords and occupiers refurbish and redevelop premises,” adds Mr Wilén.

With more work coming through the pipeline, Glenigan forecasts underlying starts to rise by another 13% in 2025, when £5.3 billion-worth of office work could start on site and boost industry workload.