Central London sees office construction return to pre-crisis heights

10 February 2017 Consultancy.uk

Office construction in London has hit heights not seen since prior to the financial crisis, as total new stock under construction increased 4% in twelve months time to 14.8 million square feet. The City continues to attract the largest stock of new office buildings, at almost 70% of total office construction projects. However, while financial services firms continue to be the keenest to let new stock, vacancy rates across total central London stock have climbed to 4.8% – with further demand uncertainty from Brexit and rates rises on the cards.

Following a period of subdued growth in the wake of the 2008 financial crisis, crane activity across London has again picked up as new office buildings rise from the ground. In Deloitte’s latest ‘Crane Survey’, covering the last six months of 2016, the firm maps the current office construction schemes across central London, as well as considers the future outlook for development in the space.

Central London: total volume under construction per survey

In total, more than 14.8 million square feet of new space is under construction in central London, up 4% on the previous survey and more than 53% up on the ten-year average of 9.7 million square feet. Construction activity, following lows as fallout from the financial crisis which saw new offices construction fall to just over 3 million square feet, has rebounded to levels last seen in the 2002-2003 period and just prior to the crisis.

The firm notes however that the current high level of activity masks two factors, which paint a slowdown in the market. The first is that the current period contains around 1 million square meters in projects whose completion was set for the period itself, and the second is that new projects have decreased significantly (43%) on Q1 2016.  

Central London: total volume under construction by submarket

In terms of project location, the City, home to most of the biggest firms in the capital, continues to draw the lion’s share of new office space, topping 8.8 million square feet. The West End and Midtown come equal in second place, with 1.7 million square feet apiece. Paddington shows the lowest construction volume of the submarkets considered.

Central London: office space under construction

The research also considered the respective change in office space under construction between Q1 and Q2 2016, as well as changes in available and let square feet of the stock under construction. The analysis finds that the City again comes in on top, with almost 8.8 million square feet, up 7% on the previous survey, while demand for the space has increased slightly, with already let space up 15%. The West End and Midtown have seen considerable contractions in the construction of new space, at -25% and -20% respectively – as a number of schemes finish and lower number of new starts add to the total.

The rapid growth in Southbank, where new construction is up 664%, are largely the result of the 1 and 2 Southbank Place. The Docklands and Paddington too have seen considerable increases in activity, up 39% and 65% respectively, following one new start each.

Central London: percentage of pre-completion letting space let by sector

According to the accounting and consulting firm, demand for new space continues to be sustained, with let space under construction up 2% on the previous survey and 44% on a year earlier. The research finds that firms across the city are still actively seeking out more, or more functional space; 41% are consolidating various locations into more space overall and 43% are simply taking more space.

In terms of the segment most actively picking up new space, financial services takes the number one spot at 42% of total under construction space (2.5 million square feet) – international banks account for the largest share at 1.8 million square feet. The TMT sector comes in second spot, with 33% of the total space, followed by corporations at 10% and legal firms at 9%. Professional services firms, insurance and government are all on 2% of the total pie apiece.

The research notes however, that across London there has been a slowdown in tenant demand for existing space, which is further affected by the large volume of new stock to the market. Total vacancy rates have risen slightly, although from record lows, from 3.9% at the start of 2016 to 4.8% in the latest survey. The effects of key market factors such as Brexit, particularly on key financial services firms dependent on single market access, along with cost increases following impending business rates revaluation, remain to be seen.

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Ensuring data quality imperative for smart asset management

25 March 2019 Consultancy.uk

By implementing innovative Asset Performance Management systems, utilities firms can maximise their utilisation of assets and minimise maintenance costs across their portfolio. However, according to Louis Morgan of Smart Grid Forums, without securing quality management systems for the data which smart grids rely upon, companies risk missing out on the benefits of asset performance grids.

Smart asset management presents a major opportunity to professionals across the business spectrum. In this context, a new event hosted in London is looking to help smart-grid asset management professionals meet the needs of a changing energy industry with digital asset management. The first annual Grid Asset Management event is due to take place between the 14-16th of May 2019 at the Millennium Hotel in Knightsbridge, London.

The conference will bring together leaders and experts from across Europe, in order to benchmark their digitalisation roadmaps. In a piece posted on the Smart Grid Forums website ahead of the event, Louis Morgan, a Conference Producer at Smart Grid Forums, has outlined the importance of investing in innovative asset performance technology for utilities firms, which can help ensure long-term stability for assets management in the utility sector in the face of increased complexity  .

Ensuring data quality imperative for smart asset management

Traditionally, the decision to invest in a given asset was made on the basis of an expert’s judgement of the risks posed by its failure, having typically been assessed via a risk matrix or a similar qualitative method. After that, a decision would be taken as to whether it should be replaced. However, according to Morgan, as the pace of change and complexity increases, these methods can no longer provide the required level of certainty. Uncertainty about changes to consumption patterns and load profiles brought on by the energy transition produces a vast number of possible scenarios that investment planners must consider.

As a result, Morgan explained, “utilities are seeking to support their investment decisions with quantitative risk management methods, centralising expertise from across their operations into a consistent, numerical framework that accurately captures the risk posed by all kinds of asset failure to all stakeholders.”

Companies are doing this by turning to ‘smart grid’ utility management, or systems which work to invest in the maintenance and replacement of millions of assets spread across thousands of kilometres of network. However, this is by no means a silver bullet, and in the age of the smart grid, planning ahead is more complex than ever. To ensure the long-term stability of their grids, then, utilities must deploy standardised investment decision-making practises supported by advanced modelling capabilities.

Morgan elaborated that the best way of facing this problem is through the combination of condition, utilisation, reliability and demand data. In that case, risks can be quantified in financial terms and investment budgets can target the assets posing the highest total risk, thus deferring investment in lower risk assets and optimizing the long-term budget. However, decisions informed by these risk models “will only be as good as the data and the assumptions that support them”, meaning utilities must therefore find ways to improve the volume, variety, veracity and velocity of the data they employ in their investment planning models.

“This means digitalizing asset operations, rolling out sensors and implementing systems that integrate data from a range of internal and external sources in real-time,” Morgan expanded. “Utilities must also scour their business for expertise about different assets to ensure that their risk management frameworks accurately capture the true risks posed by asset failures.”

This is in keeping with a trend which goes well beyond utilities. Business leaders of all shapes and sizes are currently having to address how they manage data quality – as poor information being input into any automated system can essentially negate the efficiencies such systems bring to the table. To this end, robust data governance is critical.

Concluding his article, Morgan said, “It is clear that there is a great deal of opportunity for utilities to obtain significant business benefits from improving their investment planning capabilities. More accurate risk management, supported by a reliable data-driven method, will deliver better financial outcomes from investment activity... But to achieve these capabilities, a lot of work must be put in to establish the systems, processes and frameworks which underlie them. Utilities must also make difficult choices about how they quantify risk and the appropriate range of data to feed into their investment planning models.”

This topic will be tackled in-depth at this year’s Grid Asset Management 2019, a conference, exhibition and networking forum aimed solely at smart grid asset management professionals.