! ! ! ! ! ! ! ! ! ! Table of Contents!
! ! Introduction!
3!
Basic Economic Principles and their implications.!
4!
Recession-countering economic decisions and the architectural industry.! 5! Good design backed by positive economic decisions.!
12!
Conclusion.!
15!
Bibliography & Filmography!
17!
Appendix A - RIBA Future Trends Surveys!
24!
Appendix B - Jones Lang LaSalle Report February 2013!
30!
Appendix C - Official Journal of the European Communities!
42!
2
! Introduction! ! There have arguably been, in recent history, three events that have drastically affected the UK construction industry in such a way that economic policies and government legislation have intervened to repair the resultant damage. Often the construction industry has been at the helm of this recovery process, asking the various bodies that comprise it to respond and generate economic growth. These are:!
! !
- The voting in of the Conservative government,1979. The main results of this were
the decline in public sector works within the UK, the introduction of the ’Right to Buy’ scheme and the facilitation of private investment-led construction.!
! !
- The housing price crash in 2007. Constantly rising house prices lead to a house
price bubble, it’s burst resulting in huge financial loss to the construction industry.!
! !
- The economic crash of 2009. Since then the government has begun implementing
measures to generate economic growth, directly targeting the construction industry as the catalyst.!
!
Parallel to this, additional pressures are being felt within the industry, to build better, more material and emission sustainable houses, responding to the still-increasing issue of urban sprawl. A higher demand than ever for affordable housing forces the industry to face the dilemmas between pushing for economic recovery through construction, and doing this without ignoring the demands of first-time buyers through forcing them out of the market with constantly rising house prices. With constant improvements in technological innovations being made available to architects (from the availability of new methods of construction, to the more recently developed tool of designing through BIM ) there is a social responsibility to achieve even higher quality building standards. !
!
But to what cost? Through a brief analysis of the economic climate present since 2007, this paper will attempt to illustrate that there are examples of good policy and design available, with profitable results to the economy, all of which are being done in a controlled manner, supporting the needs of the citizens they affect. ! 3
Basic Economic Principles and their implications.!
!
Economic policies are predominately divided into a either Macro or Microeconomics. Macroeconomic policies effect every industry in the economy, households, as well as the government itself. It is predominately the way in which wealth is determined and distributed, and as such has certain management mechanisms which determine this distribution. These mechanisms are simply: Monetary Policy, Fiscal Policy and legislative measures1.!
!
The effect of these mechanisms then filter through to a microeconomic scale, forcing individual offices and households to begin searching for ways in which to maximise the value of their work and earnings2. These
decisions are hugely influential in regards to the
Fig. 1. UK Real GDP from 1948.
work they encourage and
promote, and begin to form trends within the building industry. Positive economic policy targets economic growth. This is traditionally shown in the GDP3 of a country (Fig. 14) and
is also monitored through annual levels of inflation5. Economic growth results in a higher
1
Monetary Policy controls the ‘amount’ of money in the economy. This is done through the control of interest rates, on a monthly basis, and is set by the Bank of England. Fiscal Policy controls the taxes and spending levels by the government. This is an annual change. Immediately we can see that there is a time-scale factor to the use of these controls. Legislative measures are laws set by governments which begin to directly effect both the supply and demand of goods and services, and are much more efficient at targeting specific issues. 2
Twum-Ampofo “New pension rule will puncture profits” 2014.
3
Gross Domestic Product.
4
Office of National Statistics. ! http://www.ons.gov.uk/ons/rel/elmr/explaining-economic-statistics/long-term-profile-of-gdp-in-theuk/sty-long-term-profile-of-gdp.html 5
The steady increase of prices in a country, targeted at 2% in the UK. 4
standard of living, better social welfare and more services available to citizens. Being a hugely influential industry in regards to the growth of a nation, the construction industry (forming 6.3% of the nation’s GDP6), driven recently by private funding, will look to
maximise the opportunities government policies present; policies which inadvertently favour certain practices and offices based on their size, specialisation and location. !
!
The interrelated relationship between economic decisions and politics means political decisions made by a government in office, as well as pledges by opposition parties, directly affect households, workplaces and the design and construction practice. It would be impossible to discuss how the economy is effected without beginning a political conversation, the intricacies of which are too wide to cover in this paper, however references to it would be appropriate. !
! Recession-countering economic decisions and the architectural industry.!
!
The government’s heavy involvement within the construction industry was generally seen to start post-World War II and then more in 1963. Sir Keith Joseph, the then Minister of Housing, began what became known as the ‘Numbers Game’7. So as to achieve the
promised number of social houses which won Labour the elections, prefabrication, the newest construction method available to the market, was considered to be the best approach. It was seen as a fast, reliable and high-quality construction. Huge pressure from the government forced local authorities and construction companies to match the large number of houses promised using subsidies. The system became increasingly complicated as there were so many available policies; a system only really understood by contractors, who took advantage of their position, leading them to cut corners, build faster, but with huge penalties to the quality of construction. The contractor became the designer, producer, supplier and beneficiary of the building industry8. Of course this didn't last, as the
damage these buildings were causing became too large to ignore, with the demand for social housing dropping in the 1970s, as well as the new ‘Right to Buy’ scheme introduced 6
Office of National Statistics.
7
In a bid to win upcoming elections, hundreds of thousands of social houses were being promised to voters. The Labour Government started promising even more as part of their own bid, with Harold Wilson winning the Parliamentary elections based on these promises. 8
Curtis, Inquiry: The Great British Housing Disaster 5
in 19799. This began to show the decline of the public supply of housing and the increase
in that of the private sector10. !
Fig. 2. Future Trends Survey of expected work load.
! We are, in a way, finding ourselves in a similar situation today. After the recent economic crash in 2009, the government began to implement economic policies to stimulate growth, many of which were specific to the construction industry. Since Fiscal Policy can prove unpopular with voters (as it can lead to increase taxes or a decrease in government spending) the stabilising factor is usually achieved by legislative measures and Monetary Policy. In some ways the current government was not only successful11 with their
approach, but almost overly so. Positively, it lead to a clear rise in confidence of job availability with still more upward trends (Fig. 212), and market confidence is the key driver
to every economic growth strategy13. !
9
Collins, The Great Estate: The Rise & Fall of the Council House
10 11
The Economists, “Estate of Mind.” 2013 Rogers, “Contractors share architects’ optimism” 2014
12
Fig. 1 RIBA, Future trends Survey January 2013, 3. See also Appendix A, p. 24! http://www.architecture.com/Files/RIBAProfessionalServices/Practice/FutureTrends/ January2014.pdf 13
Appendix A, p. 24 RIBA Future Trend Survey, January 2014 6
! However, for the architectural profession, some of these attempts at policy making can appear short-sighted in their goals, in regards to the role played by architects, the work they produce, and the standard to which they produce it, as well as the long-run effects on the economy. There has developed a belief that the government is attempting to support the industry, however, it could be argued that there has been a lot of misdirection and vagueness into what the result is. Through producing and commissioning a number of studies that begin to highlight the problems within the
Fig. 3 - New builds detached from the city.
construction industry (Sir Michael
Lyon’s commission14, the Jones Lang LaSalle15 and London Finance Commission
reports16 for the Mayor of London or the Homes for London Housing Strategy17 to name a
few) architects find themselves surrounded by a huge number of reports, of which few are conclusive, even less are legally required to be adhered to, and almost none are supported by the private bodies funding any serious work. The result of doing so often results in smaller profit margins and lengthy application processes; all considered hugely costly delays. ! !
14
Knowles“Building Credibility” 2014
15
Appendix B p. 30 - Jones Lang La Salle, “Permitted Development Rights for Change of Use from Commercial to Residential.” 2013 16
London Finance Commission “Raising the capital” 2013.
17
Greater London Authority, “Homes for London: The London Housing Strategy.” 2013 7
The result has been that the industry has lost its direction and guidance from the government18, losing
confidence in the prospect of real backing from them19.
Meanwhile the bodies financing major construction work continue in trying to take advantage of the current economic Fig. 4 - % change of vacant properties to occupied, South East
climate and legislation20, often
England.
building in areas which
are detached from the city (see Fig. 321) or squeezing as much space as possible out of
the existing building stock and space available (Fig. 422 & 523). Foreign investment is seen
to be a hugely influential factor to the demand for housing, resulting in the inflation of house prices catered to ‘outside money’. This brings up the very real issues of affordable living, multi-family homes and social responsibility24. Low interest rates and a government
‘Help-to-buy’ scheme are leading to an increased demand by new home owners wanting to buy new, affordable homes - quickly. Meanwhile, companies who have a large capital
18
Wainwright, “Boris Johnson’s abuse of planning power is an assault on democracy,” 2014
19
Rogers, “Forecast paints stronger recovery in construction.” 2014
20
Greater London Authority, “Permitted Development Rights former change of use from commercial to residential” 2014. 21
The Economist. “Breaking the stranglehold,” 2014.
22
Knowles, “The case for space,” 2014.
23
The Economist, “Road Blocks,” 2013.
24
Most recently this took shape in the lack of support many housing Associations showed for the latest prospectus issued by the Homes and Communities Agency, requiring a larger focus on the provision of smaller homes. See RIBA, “HCA to face resistance over smaller homes demand,” 2014. 8
bank do not see this market as a profitable one, building instead homes which are expensive and often not particularly well designed. Meanwhile government spending is being monitored and limited25, and tax revenue is
generally lower26. Now the
government finds itself in a difficult position of having to meet a rising demand with a limited supply. Hence policies are adopted by the government to subsidise affordable-housing developments, Fig. 5 Dwelling stock apparently increasing, however this is a result of subdividing existing property, rather than new built.
rather than front the whole cost themselves (reminiscent of Britain in 1963 perhaps) as does allowing the change of use of office spaces into residential (legislative policy geared towards the meeting of consumer Demand and construction Supply).!
!
Where we now find ourselves is that a clique of construction companies and private residential building firms, funded in a large way by foreign clients are slowly pushing up house and land prices; potentially a new house price
Fig. 6. UK House price index.
25
Too much government spending discourages private investment through the ‘Crowding Out’ effect. See: ! Threadgould, Macroeconomics for AS Level, 36-37. 26
In Economics this is known as ‘Fiscal Drag.’ 9
bubble27 (Fig. 728). This is what
happened in 2007 (Fig. 629).
House prices were high, rents provided by these houses were also large, meaning people were willing to pay huge prices for housing for ‘speculative reasons30’, seen as an investment
rather than a dwelling. Houses became over-valued with the prices eventually crashing as they became unmanageable. The most high-profile job of this type is Fig. 7. The Rising house price in London compared.
now the 1 Blackfriars project by St George Construction London.
What is disguised as ‘visionary’, ‘inspiring’ and ‘elegant living’31, is misleading, and a poor
addition to the city (Fig. 8-1032). !
!
Architects find themselves in the uncomfortable situation of wanting to keep a practise running and profitable, encouraged to take these kinds of jobs, where they have minimal design input other than that of a ‘construction drawing producer’ who is not in a position to use their design skills to effect the city in a much more positive manner, and the construction company has all the authority to make design decisions. Larger architectural companies are generally in a better position to receive these types of job, resulting in the ‘pushing out’ of small, newly set up, design-ambitious companies. This becomes a problem for all start-up businesses in different industries as they are facing, among other things, the very real issue of high rent prices33.!
27
Nicolaci da Costa “London housing market shows new bubble signs” 2014.
28
The Economist, “Road Blocks” 2014
29
Office of National Statistics, http://www.ons.gov.uk/ons/dcp171778_352184.pdf.
30
Black, The UK Economy 1999 - 2009, 13.
31
Selby “Vision of The Future”, p. 38-42
32
Extracts from Selby, “Vision of The Future”, p. 38-42
33
Francis,“Incubate to accumulate,” 2014. 10
(starting below - clockwise) Fig 8, 9, 10." The future, architectural landmarks where we can compare towers.
! 11
Good design backed by positive economic decisions.!
!
There is not necessarily a direct link between economic growth and quality architectural design. In fact, there is a common misconception that the one excludes the other. However what is actually a more accurate statement is that the ‘profit’ or ‘gain’ of good architecture often manifests itself in a non-measurable fashion. How do you quantify a ‘good space’ or ‘experience’? it does not represent itself as a measurable return on investment. It would probably not be fair to expect this from bodies in the construction industry who’s goal, ethos or mentality, is not affected by the social and cultural responsibilities architects are trained to design with. ‘Architecture is an intellectual, cultural, artistic and professional activity”34. Though it can be
appreciated that architectural critique is a subjective point of view, the benefits of projects can be seen through their use. !
!
A good example of this is that of the ‘High Line’ project in Manhattan, New York35. It was
considered an innovation and a ‘leap of faith’ of sorts by the administration to go forward with this task. Through collaborative design, a fantastic piece of the city formed. A public amenity proved that it could become a trigger to Fig. 11 (top) and 12. Stills from Liz Diller: A moment
effect economic factors in the city:
of supreme nothingness. Before and after.
i.e. property prices were rising due
34
This has even been outlined in the European Union’s official Journal of European Communities. For further details see p. 2 from Appendix C p.42 or:! http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2001:073:0006:0007:EN:PDF 35
Finding itself in a run down location, the High Line faced strong local opposition to be demolished, so as to increase the property prices of the surrounding area. A local opposition group had however put forth the idea of transforming the rail track, idle since 1980, into a public park, looking for it it be a catalyst in the development of the city. A progressive administration under Mayor Michael Bloomberg pushed this, and other projects in a positive manner. 12
to amenities, not through speculative value. Not only this, but the site became an architectural inspiration (Fig. 11& 12)36. Neither were these isolated cases. New York’s
planning department, with the active involvement of Mayor Bloomberg, slowly grew and developed the city in an orderly way. it was controlled, well zoned and to a high design standard. New York’s population is expected to grow by 11% by 2030, to 9.1 million, and though they are geared to the growth of the city, New York has a conscious strategy not to push the existing population out as they do so37. The mayor himself even had
comprehensive legislative strategies of rewarding migrant workers with citizenship if they actively contribute to the city they live in38. !
!
What does this mean for London? We need to start taking legislative and economic measures to enforce the need for good design, high standards of living and a greater element of community integration, rather than alienating existing citizens through high costs of living or poor living conditions. Recent exhibitions are starting to show people are interested39. The current RIBA president has himself championed the inclusion of space
standards into the Building Regulations, so that the contractors responsible for the vast amounts of new and redeveloped dwellings cannot avoid the matter any more40.!
!
What has also appeared in a recent study is that there are, amongst others, two very large issues the UK construction industry faces in terms of its development. First, is the surprisingly high missed opportunity in utilising the industry’s export capability41. Linked to
this lack of export of skills is the lack of technological advance, something that makes a country’s position in the market more desirable and competitive towards foreign demand. The second factor seems to be that inadequate information is available of any positive economic subsidies available in these fields, especially for smaller practices to take advantage of. Add to this an increasing level of regulation imposed on companies (from 36
Luisiana Museum of Modern Art “Liz Diller: A moment of supreme nothingness,” 2014
37
Speirs, “The Water Works - New York,” 2012
38
Tuck, “Follow This Leader - New York,” 2012
39
Woodman, “The Royal Academy senses a new sensibility,” 2014.
40
Fulcher, “New housing standard will tail if not in the Regs, say architects,” 2013.
41
Research showed that only large, productive companies are exporting their services, with only 6% of businesses doing so. See: ! Department for Business Innovation & Skills. “UK Construction - An Economic analysis of the sector,” 2013. 13
health and safety to CO2 emission requirements) items which are difficult to address for small practices, limiting their ability to be competitive; another reason only large companies are flourishing.!
!
What London needs to do is take a leaf out of some of the great success stories of cities around the world. Copenhagen has a heavily involved planning commissioner,constantly developing infrastructure, a strict high-rise policy to force architects to design an interaction with the street-scape and loosening of visa regulations, all enforcing a sense of pride in the citizens42. Helsinki has tried to discourage new-build and to keep the character
of the city, has encouraged transforming existing areas for development rather than encouraging new-build, paired with an outstanding school and health system.
42
Bloomfield, “Top of the world - Global,” 2013. 14
Conclusion.!
!
London seems to be developing with a sense of rush. Economic factors, policies and legislation are targeting rapid construction, but with little sense of the general, long term effects of this, affecting the design ethos of the country’s practices43. In many ways this
could be considered a very inefficient use of capital, one which could be countered with collaborative design44 and an greater interaction between government and the
architectural industry. Some may argue that studies like “Construction 2025” are the start of this, but in reality do little to suggest how we take these steps of interaction45. Policies
should be adopted so that developments involve the people of the city they are being built in. It instills a sense of pride and encourages a strong sense of community46. This could
even take the form of grants or tax breaks for companies working within the immediate area of their headquarters, by rewarding (or punishing as may become the case of taxing empty ‘holiday homes’47) these correct aspects of a design and taxing those who are
motivated by sheer profit. In addition, not all development projects need to be in London48.
Developments can be encouraged in other towns and cities around the country, supported always by economic policies to encourage investment (as done in Medellin, Colombia49).
When cost and speed of construction are being favoured it leads to a step backwards for the architectural industry, leaving practices facing an identity crisis: do they consider themselves a monitoring tool for a construction company driven by profit50, or do they push
43
Fearn, “‘The race to build new homes drives down quality’, says leading Architect” 2014.
44
Olycayto,“Learning from Glas Vegas: An AJ urban design charrette and Philips Lighting Liveable Cities workshop, Glasgow 2013,” 2013. 45
HM Government. “Construction 2025 - Industrial Strategy: government and industry in partnership” 2013. 46
A good example of this are the citizens of Utøya, Norway, after a local shooting. Here the citizens reclaimed the island through their involvement in the redevelopment of the city. See:! Farago, “Rebuilding Process - Utøya,” 2013. 47
Booth, “Richard Rogers calls for severe tax on owners of empty houses,” 2014.
48
Bloomfield, “Time to open wide,” 2013.
49
In Medellin, Colombia, the government encouraged growth through the design of key projects such as a green belt through (not around) the city, high quality social housing as a counter point to the favelas, the development of a waterfront, huge tax breaks for investing companies (essentially a legislative subsidy), and all this through a constant coordination with the city’s architects. See:! Moloney, “City of mod - Medellin,” 2013. 50
Waite, “Fees stuck in doldrums despite upturn in architects’ workloads,” 2013 15
for a more responsible, proud and active role in the building design process51. Perhaps the
results of the Housing Standards and Farrell Reviews52 will be the eye-opening signal the
government needs to start a radical refocusing of efforts, to not only grow economically but also sustainably, not just in terms of Carbon emissions and efficient material use, but rather in clever use of capital to develop lasting, beautiful and innovative designs that benefit not just the balance sheets.!
! ! !
51
Tritton “Architects must be more upfront about their fees” 2014
52
Woodman, “The future of British housing hangs in the balance,” 2014. 16
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! !
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!
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!
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!
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!
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!
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!
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!
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!
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!
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!
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!
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18
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Twum-Ampofo, Mark. “Can I take a loan from my company?” Building Design Online, accessed January 23, 2014.! http://www.bdonline.co.uk/business/can-i-take-a-loan-from-my-company?/5040158.article!
!
Twum-Ampofo, Mark. “Can a shorter week sane architects’ jobs?” Building Design Online, accessed January 23, 2014.! http://www.bdonline.co.uk/business/can-a-shorter-week-save-architects%E2%80%99jobs?/5050565.article!
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Twum-Ampofo, Mark. “New pension rule will puncture profits.” Building Design Online, accessed January 23, 2014.! 22
http://www.bdonline.co.uk/business/advice/new-pension-rule-will-puncture-profits/ 5056767.article!
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Wainwright, Oliver. “Boris Johnson’s abuse of planning power is an assault on democracy,” The Guardian. Accessed January 29, 2014.! http://www.theguardian.com/artanddesign/architecture-design-blog/2014/jan/29/borisjohnsons-abuse-of-planning-power-is-an-assault-on-democracy!
!
WIles, Colin. “‘Affordable housing’ does not mean what you think it means,” The Guardian, accessed February 03, 2014.! http://www.theguardian.com/housing-network/2014/feb/03/affordable-housing-meaningrent-social-housing!
!
Woodman, Ellis. “The future of British housing hangs in the balance,” Building Design Online, accessed February 14, 2014.! http://www.bdonline.co.uk/comment/the-future-of-british-housing-hangs-in-the-balance/ 5066524.article!
!
Woodman, Ellis. “The Royal Academy senses a new sensibility,” Building Design Online, accessed January 24, 2014.! http://www.bdonline.co.uk/comment/the-royal-academy-senses-a-new-sensibility/ 5065991.article!
!
Film!
!
Collins, Michael (prod.). The Great Estate: The Rise & Fall of the Council House. BBC, First broadcast April 2011.!
!
Curtis, Adam (prod.). Inquiry: The Great British Housing Disaster. British Film Institute, 1984. 49:38.!
!
Luisiana Museum of Modern Art, (prod.) Christian Lund. Liz Diller: A moment of supreme nothingness. Luisiana Channel 2014. ! http://channel.louisiana.dk/video/liz-diller-supreme-nothingness! 23
Appendix A - RIBA Future Trends Surveys!
! ! ! !
24
Memorandum
The RIBA’s monthly Future Trends Survey was launched in January 2009 to monitor business and employment trends affecting the architects’ profession. Participants give monthly predictions for overall workload and staffing levels over the next three months, and are also asked about their workload predictions in key sectors: private housing, commercial, community and public sector. In addition practices are asked on a quarterly basis about their current workload and staffing levels. The Survey is carried out by the RIBA in partnership with the Fees Bureau. Results of the Survey, including a full graphical analysis, are published each month on www.architecture.com. The following is a summary analysis of the results from the January 2014 Survey returns. Future workload (January 2014) How do you expect the architectural workload in the organisation you work in or own to change over the next three months Overall Expect Decrease Stay the same Increase TOTAL Balance
% 8 48 44 100 +36
(The definition for the balance figure is the difference between those expecting more work and those expecting less.)
The RIBA Future Trends Workload Index saw a significant increase this month, rising to +36 in January 2014 from +30 in December 2013. The New Year has seen a further strengthening of confidence levels, which had been steadily rising throughout the second half of 2013. Only 8% of UK practices expect workloads to reduce over the next quarter and nearly half expect them to increase. It is heartening that in terms of geographical analysis all of the UK nations and regions are now returning very positive balance figures for future workload forecasts. The improvement in sentiment is clearly no longer restricted to London and the South, but is much more widespread, Similarly, in terms of practice size, small (1 – 10 staff), medium (10 – 50 staff) and large-sized practices(51+ staff) are all reporting very positive balance figures, suggesting that workload prospects are improving across the board. With regard to actual work in progress, our practices recorded an overall increase in workload of 6% on a year-on-year basis. This is the second successive quarter that we have recorded an increase in aggregate workloads. The following graph plots the RIBA Future Workload Index over time:
Memorandum
In terms of sector analysis, all our key sectors saw an improvement in confidence levels this month. The private housing sector workload forecast remains the most buoyant, increasing to +35 in January 2013 from +31 in December 2013. The commercial sector workload forecast rose to +15 this month, up from +11 last month. The community sector workload forecast also saw a solid increase to +10 in January 2014 from +4 in December 2013. Our public sector workload forecast stands at +4, perhaps indicating that whilst public sector activity remains depressed there is at least a return to some stability in the public sector pipeline. It does appear that the current growth is largely being driven by a widespread strengthening of the private housing sector across the UK and a pick-up in commercial projects in London and the South of England and the Midlands and East Anglia. The following graph tracks the sector predictions in the RIBA Future Trends Survey over time:
2
Memorandum
Future staffing levels (January 2014) How do you think the number of permanent architectural staff employed in your organisation will change over the next three months?
Permanent Staff Decrease Stay the same Increase TOTAL Balance
% 7 80 13 100 +6
(The definition for the balance figure is the difference between those expecting to employ more permanent staff in the next three months and those expecting to employ fewer.)
The RIBA Future Trends Staffing Index was unchanged this month, standing at +6 in January 2014, with the majority of practices expecting their staffing levels to stay the same during the next quarter. Medium-sized practices (11 – 50 staff) remain the most optimistic this month about their ability to sustain higher staffing levels in the medium term, returning a balance figure of +21. Although the RIBA Future Trends Staffing Index has been in positive territory for some time, this has not yet been reflected in an increase in actual staffing levels, which our practices report to be static on aggregate on a year-on-year basis.
3
Memorandum
In December 2013, the percentage of our respondents reporting that they had personally been under-employed in the last month increased by one percentage point to 18%. This would suggest that although the amount of spare capacity within the architects’ profession is gradually reducing, overall productivity remains below potential at present. The following graph plots the RIBA Future Trends Staffing Index over time:
Anecdotal commentary received continues to paint a picture of a widespread pick up in the level of enquiries and new commissions, but in the context of a market which remains fiercely competitive with significant pressure on feel levels. There is some evidence of a little bit of emerging inflation in tender prices received from contractors for building works. Paul Chappell (Manager of RIBA Appointments) reports that he has noticed a very strong start to recruitment in 2014. This has resulted in an 89% increase in the number of architectural jobs advertised on RIBA Appointments during January compared to last year and in particular demand are experienced Part 2 Assistants and recently qualified Architects who have taken UK projects from start through to completion. After a number of years of static salaries, for people with the right experience 2014 may well be a more positive year. The RIBA Future Trends Survey is based on a representative sample of the range of different practice sizes and geographical locations which enables analysis of the trends in sectors, size groups and by nation and region. A total of 219 practices took part in the Survey in January 2014. The 4
Memorandum
development of a larger database of respondents will increase the statistical accuracy of the survey, and if your practice would like to participate in future months, please contact the RIBA Practice Department on 020 7307 3749 or email practice@inst.riba.org. The survey takes approximately five minutes to complete each month, and all returns are independently processed in strict confidence by our partners the Fees Bureau.
5
Appendix B - Jones Lang LaSalle Report February 2013!
!
30
Permitted Development Rights for Change of Use from Commercial to Residential
February 2013
22 February 2013
Contents 1 2 3 4 5 6 7
Introduction ....................................................................................................................................................................2 The Central London Office Market ..............................................................................................................................3 The Central London Residential Market ....................................................................................................................5 The Longer Term Perspective .....................................................................................................................................7 Relative Sales Values ....................................................................................................................................................8 Other Factors..................................................................................................................................................................9 Conclusion ....................................................................................................................................................................10
COPYRIGHT © JONES LANG LASALLE IP, INC. 2013. All Rights Reserved
1
1 Introduction You have asked us to update our report dated October 2011 entitled “Potential Impact of Use Classes Order Relaxation for Change of Use from Offices to Housing in City Office Stock,” and to extend it to include the West End (i.e. the bulk of the Central Activities Zone) and Docklands. We have commenced this task but, given the timetable for responding to the consultation, this note is a commentary on our expected conclusions and this will be supplemented by the fuller analysis in due course. The office markets in the West End are significant with a stock (91.3m sq ft or 8.48m sq m). By comparison with the City and Docklands, there is less of a concentration on accommodating large financial users and, as a result, on average, the buildings are smaller. The character of the locations are already mixed use with long established residential communities in, for example, Mayfair, Pimlico, and Belgravia, alongside core office locations in Mayfair/St. James, Victoria, Paddington, Midtown, and North of Oxford Street. The office markets in Docklands are focused on Canary Wharf and the north Isle of Dogs area. Total stock amounts to 20 million sq ft. Within the Canary Wharf Estate itself, the buildings have large floor plates. Beyond the S106 Charging Zone, buildings are smaller and more appropriate for conversion. The residential value levels in Central London are such as to encourage conversion to residential use, even in core office locations. When buildings fall vacant, many could convert to residential and, if this was possible under the General Permitted Development Order (and thereby ‘avoiding’ affordable housing requirements and S106 obligations), there would be a powerful incentive to convert many existing office buildings to residential where the existing building form already maximises (in height and massing terms) the use of land.
2 The Central London Office Market – 2012 7.2 million sq ft of Central London (City, West End and Docklands) offices were taken up in 2012, compared to an average annual take up over the last ten years of 9.3 million sq ft. This below trend take up is explained, principally, by a lack of activity in the banking and finance sector. Of this 7.2 million sq ft, approximately 5.0 million sq ft was Grade A. The total vacant space in the same area at the year-end was 13.4 million sq ft. Of this, 10.4 million sq ft was Grade A space and only 3.7 million sq ft was new development. However, an additional 6.3 million sq ft of speculative development is underway and will feed through to the availability statistics over the next three years. The majority of this new space will be in the City. The amount of space under construction is a relatively small pipe line by historical standards and there will be little added in the foreseeable future. Even assuming a continued depressed rate of annual take up of say 5.0 million sq ft of Grade A, this represents only three years of supply.
3 The Central London Residential Market – 2012 Demand in the new Central London residential development market was higher in 2012 than in 2011. Interest increased from both overseas and UK buyers, with domestic investors making a notable return to the market. Prices have been forced higher by the demand and supply imbalance, but the unsupportive and uncertain global and UK economic backdrops have tempered price rises. International demand for Central London residential property has increased over the last year. With heightened demand from the likes of the Middle East and Turkey, as well as mainland China, Indonesia and India, competition for stock is intensifying. Residential demand from UK buyers has been relatively quiet over the past few years with access to mortgage finance and a subdued economy playing fundamental and important roles. Although the economy is still in the early stages of recovery, domestic buyers are now returning in greater numbers. The expanding and flourishing London rentals market is a clear driving force, but the additional demand is certainly helping to support and push values upwards. The increasingly strong demand picture coupled with the restricted volume of development has helped force values higher. New Central London residential prices have been rising steadily since early 2009. Over the past two years price growth has been quite sedate at around 3-4% pa, but given the economic backdrop worldwide, in the Eurozone and in the UK, the fact that prices have risen in every quarter during this time is testament to the attraction and advantages of the London residential market.
New Central London development price growth Source: Jones Lang LaSalle, Land Registry
CLD quarterly (LHS)
CLD annual (RHS)
UK annual (RHS)
Dec 12
Sep 12
-25
Jun 12
-10
Mar 12
-20
Dec 11
-8
Sep 11
-15
Jun 11
-6
Mar 11
-10
Dec 10
-4
Sep 10
-5
Jun 10
-2
Mar 10
0
Dec 09
0
Sep 09
5
Jun 09
2
Mar 09
10
% change a year
15
4
Dec 08
% change a quarter
6
Core locations continue to outperform 130
Source: Jones Lang LaSalle
125 120
Index
115 110 105 100
Core
Dec 12
Sep 12
Jun 12
Mar 12
Dec 11
Sep 11
Jun 11
Mar 11
Dec 10
Sep 10
Jun 10
Mar 10
Dec 09
Sep 09
Jun 09
Mar 09
Dec 08
95
Outer core
New Central London development price growth Source: Jones Lang LaSalle
River Canary Wharf Central West Central North West City West End South East North Core
South West
Outer core
East West 0
2
4 % change in year to Q4 2012
6
8
4 The Longer Term Perspective It is interesting to reflect on the scale of change in recent decades. London’s stock of offices has increased by 41% since 1984. Most of that growth has taken place in the City and Docklands, where 50.4 million sq ft has been added to the stock. The West End, over the same period, has acquired an additional 12.0 million sq ft. Of course, Docklands and Canary Wharf have grown from almost nothing, but the City has expanded by 39% and the West End by 16%. Office employment in London doubled over the same period, so expansion was necessary to accommodate the additional demand. The current vacancy rate of 6.1% demonstrates that there is a healthy balance between supply and demand. But the magnitude of expansion in the City compared with the West End does, at least in part, explain the differential in rental growth between the two markets. While the City’s rents have remained broadly stable in real terms since the mid-1980s, the heart of the West End has experience significant growth. From a residential standpoint more people moving into London, UK based buyers coming back in to the market, a strong residential rental market and institutions looking at residential investments as part of a balanced portfolio all point to continuing demand for Central London residential in the short to medium term.
5 Relative Sales Values The graphic below shows maximum and average sale values per sq ft across Central London as at December 2012.
Central London development; areas and price ranges
142
Looking, for example, at the West End maximum sales prices are c. ÂŁ3,500 per sq ft which compares with a maximum office capital value of say ÂŁ2,000 per sq ft. .
6 Other Factors On a building by building basis there will be many other factors to consider when judging the relative merits of office and residential development, including the respective costs on conversion/rebuilding and the availability of funding. One of the most important at present is funding. The relatively risk averse environment means that financiers are looking for occupational commitment. For offices this manifests itself as a pre-letting but office occupiers are also risk averse and do not want to pre-commit against a background of uncertain economic circumstances. Therefore pre-lettings are rare. This paucity of finance for speculative developments has tended to favour residential where selling units “off plan� assists funding as the lender can see that money will be received when the buildings are completed to cover most or all of their loan. Also well capitalised house builders have access to their own capital for development.
7 Conclusion Past experience demonstrates that there is a significant cycle in office value and an even more pronounced cycle in office development starts accentuated by big swings in occupier sentiment and in the availability of development finance. In our opinion the mixed office and residential communities in the West End and Midtown are not “broken”. The cyclical office market and scarcity of finance is currently favouring residential but this will change over time particularly if encouraged by a pro-business economic and planning policy. The vibrancy of these locations depends on nothing upsetting the current balance and a rush to benefit from what might be perceived as a temporary relaxation of ‘normal’ planning controls might have this effect.
Appendix C - Official Journal of the European Communities!
!
42
C 73/6
EN
Official Journal of the European Communities
6.3.2001
COUNCIL RESOLUTION of 12 February 2001 on architectural quality in urban and rural environments (2001/C 73/04) THE COUNCIL OF THE EUROPEAN UNION,
8.
NOTING the holding on 10 and 11 July 2000 of a
9.
WELCOMING the Community and intergovernmental discussions which have taken place for a number of years on architectural heritage and the built, spatial and social environment, and more especially:
Desirous of improving the quality of the day-to-day environment in the life of European citizens,
I. 1.
RECALLING the objectives assigned to the European
2.
RECALLING Directive 85/384/EEC (1), which states in
3.
RECALLING the Council Conclusions of 10 November
4.
RECALLING the Council Conclusions of 21 June 1994 on
Community under Article 151 of the Treaty;
(a)
particular that ‘architecture, the quality of buildings, the way in which they blend in with their surroundings, respect for the natural and urban environment and the collective and individual cultural heritage are matters of public concern’;
the cultural and artistic aspects of education (3);
RECALLING the Council Resolution of 4 April 1995 on
6.
RECALLING the Council Conclusions of 17 December
the fifth research and development framework programme (RDFP) which, for the first time, incorporates a ‘key action’ on the theme of ‘the city of tomorrow and cultural heritage’ and addresses the issue of establishing a good-quality building environment;
(b) the ‘Framework for action: sustainable urban development in the European Union’ submitted by the Commission, which includes the preservation and improvement of building quality as an objective of the European Union;
1994 on the Commission communication concerning European Community action to promote culture (2);
5.
7.
European Architectural Policies Forum which brought together representatives of the professions and authorities in charge of architectural matters in the fifteen Member States;
(c)
culture and the multimedia (4);
the European Spatial Development Perspective (ESDP), which evokes the concept of ‘creative management of the architectural heritage’, including contemporary architecture, in an approach to preserving the cultural and architectural heritage.
1999 on the culture industries and employment in Europe (5);
HEREBY AFFIRMS THAT:
TAKING NOTE of the Presidency conclusions of the
(a)
informal meeting of Environment Ministers in Oporto on 15 and 16 April 2000, which emphasise the importance of the quality of built-up areas;
(1) Council Directive 85/384/EEC of 10 June 1985 on the mutual recognition of diplomas, certificates and other evidence of formal requirements in architecture, including measures to facilitate the effective exercise of the right of establishment and freedom to provide services (OJ L 223, 21.8.1985, p. 15). (2) OJ C 348, 9.12.1994, p. 4. (3) OJ C 229, 18.8.1994, p. 1. (4) OJ C 247, 23.9.1995, p. 1. (5) OJ C 8, 12.1.2000, p. 10.
architecture is a fundamental feature of the history, culture and fabric of life of each of our countries; that it represents an essential means of artistic expression in the daily life of citizens and that it constitutes the heritage of tomorrow;
(b) architectural quality is a constituent part of both the rural and urban environment;
(c)
the cultural dimension and the quality of the physical treatment of space should be taken into account in Community regional and cohesion policies;
6.3.2001
EN
Official Journal of the European Communities
(d) architecture is an intellectual, cultural, artistic and professional activity. Architectural service therefore is a professional service which is both cultural and economic.
(c)
C 73/7
promote architectural quality by means of exemplary public building policies;
(d) foster the exchange of information and experience in the field of architecture.
HEREBY EXPRESSES ITS ATTACHMENT TO:
(a)
the common characteristics shared by European towns and cities, such as the importance of historical continuity, the quality of public areas, the social mix and the richness of urban diversity;
(b) the fact that good quality architecture, by improving the living context and the relationship between citizens and their environment, whether rural or urban, can contribute effectively towards social cohesion and job creation, the promotion of cultural tourism and regional economic development.
III. CALLS ON THE COMMISSION TO:
(a)
(b) seek, in consultation with the Member States and in accordance with the rules governing the Structural Funds, ways and means of ensuring in the application of those funds a wider consideration of architectural quality and the conservation of cultural heritage; (c)
II. HEREBY ENCOURAGES THE MEMBER STATES TO:
(a)
intensify their efforts to improve the knowledge and promotion of architecture and urban design, and to make contracting authorities and the general public more aware of and better trained in appreciation of architectural, urban and landscape culture;
(b) take into account the specific nature of architectural service in the decisions and measures which require it;
ensure that architectural quality and the specific nature of architectural service are taken into consideration in all its policies, measures and programmes;
in the context of existing programmes: —
foster measures to promote, disseminate and raise awareness of architectural and urban cultures with due respect for cultural diversity,
—
facilitate cooperation and networking between institutions devoted to upgrading cultural heritage and architecture, and support incipient European-scale events,
—
encourage, in particular, the training and mobility of students and professionals and thus promote the dissemination of good practice;
(d) keep the Council informed of the implementation of such measures.