Time to refurb, says Jones Lang LaSalle
After last week’s strong results from major UK property companies, which highlighted the forthcoming scarcity of Grade A office space in London, Jones Lang LaSalle is pointing at the potential of refurbished and improved Grade B stock, given the drought in the development pipeline.
Dan Burn, head of City agency at JLL, last week said: “Upgrading Grade B product to Grade A standard seems a logical, relatively low-risk opportunity to bridge this supply gap before new build developments reach completion. Grade A rents also look likely to outperform prime after 2012 in London as the differentials between the two narrow. This strategy therefore offers investment outperformance opportunities.”
The company held a Sustainability Seminar last week, which included a look at the importance of refurbishments as part of a green strategy for property companies as the economy recovers. Among those presenting was Julie Hirigoyen, lead director of Jones Lang LaSalle’s Upstream Sustainability Services group, who said: “Both the changing culture of corporate occupation and the tightening hand of regulation are pushing real estate investors towards sustainable product. Refurbishment offers a significant opportunity to reposition assets on a low carbon scale, and avoid exposure to obsolescence risks.”
“Given how much can be done cost-effectively to reduce the carbon footprint of a typical building – sometimes by up to 30% – it would seem clear that current market trends and sustainability drivers are finally pointing in the same direction.”
There have been recent reports from other cities in the UK that the office sector is holding up well in other cities in the UK, for example Glasgow and Manchester, and that rents could improve further as developments have been put on hold.
Note, however, that the FT has taken a look at the IPD’s latest figures, notes the uncertainties ahead, and says the current bounce “may simply be a ripple”.
