Funders weigh up risks, developers push back start dates and contractors fret about workloads, writes Dave Rogers
Probably the biggest news so far this year in the London commercial market has been that about Mace and the decision to rename the firm.
A change like that is always going to be big. But it is big because the market right now is quiet. Probably the biggest job to get going this year – contract award accompanied by a reasonably quick start date – is JP Morgan Chase’s revamp of a 20-year-old building over at Spitalfields.
It promises to be an almighty scrap given the size of the scheme – at £500m, these projects always are – and the fact that not many of that scale are on the blocks right now. “It will be very difficult to win,” concedes the boss of one tier one contractor who will be bidding for it.
The news that JP Morgan is ready to press the green button on a £500m scheme in Spitalfields is a big deal
Who knows, by the time it is awarded, likely to be this summer, Mace might have settled upon a new name.
A quick word here, then, about that Mace name change: it might not have been around for years like others – McAlpine, Laing (the pre-O’Rourke bit) and Bovis spring to mind – but it is undoubtedly one of the big UK contractors and changing its name is a big deal.
People have emotional ties to these things. That and Mace’s decision to sell Consult, which has heralded the name change, mark the end of an era, no question. (Memo to Mace: whatever name you settle upon for the construction business, make it easy to spell and easy to pronounce.)
The Spitalfields job – One Spitalfields to give it its full name – will be closely fought and a lot of effort poured into it because a lot of stuff in London is stuck in the sidings.
London pipeline
The roll call of jobs that are, for a variety of reasons, some time away include Hill House, 70 Gracechurch Street, 18 Blackfriars, 1 Undershaft, Silk Street, 55 Old Broad Street.
There’s a lot of square footage locked up right now. London is this country’s most important commercial offices market by some distance but most of those you talk to in it, while not in despair, are sombre. There is a lot of stuff planned, but it’s a case of which funder is going to blink first.
Someone needs to send a signal that they are pressing on, to underline what the late Irvine Sellar used to call the difference between being involved and being committed. Those who worked with Sellar on big projects remember that he liked to use the English breakfast metaphor to make his point: the hen is involved, he would say, but the pig is committed.
Active developers
There are some developer clients, to be fair, that are still quite active: Stanhope, which bought Landsec’s Red Lion Court scheme last year has appointed Morrisroe to start piling work and is known to be looking at acquitting other sites to develop; Edge, the Dutch developer behind a series of schemes in the capital – its London Bridge job being built by Mace is due to complete in Q3 – made a big deal of securing the funding for a scheme in the West End that will be built by McAlpine; and Great Portland Estates has also announced a series of projects recently including its much-delayed St Thomas Yard scheme, also at London Bridge, that will be built by Bovis.
But there are plenty where not much has been happening. It is worth remembering that Eric Parry’s design for 1 Undershaft was revealed more than a decade ago. Hines said at the end of 2024 it was looking to appoint contractors to its job at 18 Blackfriars by summer last year. Since then, nothing. Both jobs, if they get going, are enormous.
Why the market appears stuck
The reasons why schemes are struggling to get out of the ground are varied. First there was covid, then the war in Ukraine and the rampant price inflation that came out of that. Now there are issues of availability of space and whether tenants are willing to move.
Funders want pre-lets on schemes that might be six, seven, eight years away from completion. Are end-users really going to commit on that so far out? It is unlikely right now, when the world is as uncertain and volatile as it is. At the start of this week, Donald Trump was going to introduce 10% tariffs on eight European countries, including the UK, in just over a week’s time; now, he is not.
Viability matters. In turn are funders going to spend, say, £300m on a speculative office scheme without a pre-let? But, the counter argument runs, without a commitment from a developer or funder to build, are would-be tenants going to move? They need, surely, to see something happening.
One of the other issues is the amount it costs to fit out some of the base builds going up. In some cases, the costs of equipping an office to the kind of spec tenants demand are staggeringly high.
Then there is the issue with overseas funders and their perceptions of the London office market. Is the return to the office quite what it was before the pandemic? Take a train or Tube on Tuesday, Wednesday and Thursday and it’s usually busy. Mondays are starting to get busier, so it’s really only Fridays that are quiet.
The news, then, that JP Morgan Chase is ready to press the green button on a £500m scheme in Spitalfields is a big deal. This job will go and the US bank wants to get started early next year once tenant – law firm A&O Shearman, formerly Allen & Overy – has moved out.
JP Morgan Chase is also behind a new headquarters tower for its business, which will be sited at Canary Wharf’s Riverside development and will run across three million square feet. It said 12,000 employees will be able to work there when it is completed, adding £9.9bn to the UK economy over the next six years.
Who will build it is not known and, traditionally, anything at the Docklands site has tended to be the domain of Canary Wharf Contractors. But there are plenty in the market who say JP Morgan and its advisors should at least talk to Mace, Multiplex and McAlpine.
Firms pivoting to more public work
The next big thing many of those firms involved in London commercial are waiting on is not a tall tower or a huge cut and carve but the new hospital programme. Already, however, the framework award is running late.
It was due by the end of last year but firms are now reckoning next month. Sixteen contractors, including Bovis and Multiplex, have been shortlisted with around 10 set to land final spots.
As ever, it is one thing getting on a framework like this, but another to see the immediate effects. Many will be hoping right now that the public sector can step in and take up the private sector slack.
Dave Rogers is Building’s deputy editor
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