Construction News

Fri June 18 2021

Related Information

Helical anticipates ‘hotelification’ of offices

25 May Much has been written in recent months about future working patterns and the return to office life. One property developer seems to have a clear vision of what’s ahead.

The Bower, a Helical development in central London
The Bower, a Helical development in central London

Gerald Kaye, chief executive of commercial property develop Helical Bar, has described the trends that he believes are going to characterise developments in the offices sector.

He says: "The office sector is on the cusp of considerable change and we believe there are four key trends that will shape the use of offices going forward and provide a clear differentiation across the sector.

"First, sustainability is at the top of corporate agendas. This is exemplified by the 2021 annual letter to CEOs from Larry Fink, the CEO of BlackRock. He wrote of a tectonic shift in the reallocation of capital to sustainable assets. Tenants will want to occupy the most sustainable and environmentally favourable buildings to achieve both their own net zero carbon targets and those of their stakeholders. For the same reasons, investors will actively seek to acquire these buildings. We believe there will be a "green" rental and yield premium for the most sustainable assets.

"The second trend is wellness. In a post-Covid environment, tenants will require the most efficient and up to date air conditioning systems to minimise the risk from airborne viruses. Sensors showing air quality in a building will be essential and office density per worker will decrease so employees will benefit from a more comfortable environment.

"Third, buildings will see greater use of technology to optimise their environment and the workplace experience. Sensors that record occupation levels will improve energy efficiency and the management of buildings.

Related Information

"The fourth and final trend is enhanced amenity. There will be greater demand for secure bike parking and high-quality ‘club style’ changing facilities. Buildings should provide an attractive working environment with food and beverage facilities close at hand. As part of this enhanced amenity, we will see an increasing ‘hotelification’ of office buildings, with five-star management a necessity. Assets are moving from passive, low risk, long lease investments to intensively managed shorter leased buildings where maximising tenant retention, rental growth and building performance will be the priorities.

"There will be bifurcation in the office sector as the ‘real’ Grade A buildings, which incorporate these facilities and amenities, diverge from the rest in both capital value and rental growth. I would expect this pattern to accelerate as tenants seek working environments that match the expectations of their employees.”

Gerald Kaye was speaking as Helical Bar reported pre-tax profits for the year to 31st March 2021 of £20.5m, which was less than half the previous year’s £43.0m. Clearly that result was Covid infected but he is confident of the developer’s market position.

"We believe Helical's current portfolio already incorporates the attributes identified by these trends and, for that reason, both our rental and capital values have performed well. With our see-through LTV [loan to value ratio] at 22.6%, we have considerable firepower at our disposal and our main focus is now on identifying and acquiring new projects. These will be a combination of repositioning, refurbishment or redevelopment opportunities, delivering best-in-class office space commensurate with a more sustainable post-Covid world."

Got a story? Email news@theconstructionindex.co.uk

MPU

Click here to view more construction news »