Positive signs of stabilisation for the workplace sector as we head into 2024 and beyond

Office fit-out and refurbishment specialist, BW: Workplace Experts, has published its latest, workplace market insights (Q3 and Q4) showing an evolving but positive picture over the last six months of the year and into 2024.

Ongoing challenges around rising costs and uncertainty, in addition, to the purpose and identity of workplaces continue. This says BW has delayed some commercial development decisions although this is also being offset by a growing flight towards quality, experience, and sustainability from occupiers.

The report highlights key trends in the workplace sector, setting out findings and forecasts for the commercial market:

• M&E capacity is strained, however skilled labour shortages are slowly improving despite an aging workforce and longer-term challenges faced by the industry.
• Whilst material prices remain over 40 per cent higher on average than in early 2020. There are emerging positive signs that materials are becoming more readily available and price increases are settling.
• Insolvency rates are now at 35 per cent above pre-pandemic figures with many specialist sub-contractors demanding staged payments; challenging the traditional cash flow of projects.
• Upward pressure on wages and labour has resulted in an overall tender price augmentation of four to five per cent. However, inflation has come down quicker than expected and interest rates have (hopefully) peaked.
• EPC C rated buildings will be the minimum requirement in 2027 – just four years from now, impacting 73 per cent of offices (with a D or lower).
  

The advice to occupiers amidst this uncertainty is summed up by Kevin P’ng, Commercial Director and author of the report at BW: Workplace Experts: “With more stability going into 2024, we would still advise caution but urge those looking to act on a lease event or embark on an office fit-out or refurbishment to plan ahead and take their time, engage early and optimise how time is used. A well-defined procurement and delivery strategy is key and whilst the growing ‘hybrid’ two-stage approach can be useful the ‘taboo’ path of negotiation can suit certain projects and prove to be an overall quicker and lower risk option.

“It is also important to consider the hidden cost of Value Engineering in both the time, resource, and potential false economies it can introduce when prioritising cost above all else. Fundamentally, the cost of construction overall rarely dramatically improves over the long term and while a softening of demand will make industry conditions more competitive, price reductions in materials and labour will be small and limited. This is an underlying notion that should not be ignored especially given the volatile landscape on various planes from political conflicts to economic challenges and longstanding changes needed for construction to become more collaborative and efficient.”