The consensus in the industry is that the office market is finally back. But which particular project should you be trying to win work on?
Yes, the london office market really does seem to be back. Rents are increasing, vacancy rates are falling and there's a mood of cautious optimism among property developers and agents. But behind the sound of champagne corks popping in Hanover Square, you can hear mutterings from construction companies about when any of this talk will translate into actual building work.
The answer is very soon - which is good news for contractors nervously anticipating a slowdown in public spending in 2007. There are millions of square feet worth of schemes with planning permission ready to go. "This year should be very strong, and the year after that. What has really struck me is how many British Council of Offices members have said how optimistic they are about 2006," says Richard Kauntz, chief executive of the BCO. "There's lots of schemes coming through - quite a lot of proposals have been given planning permission recently, particularly in the City of London. We'll certainly see an increase on the construction side."
Property services company Savills backs this up with its monthly survey of developers' attitudes. In January, private sector offices were singled out as the greatest source of growth over the next three months, with significant growth also forecast in refurbishment and fit-out.
At Davis Langdon, Neill Morrison, the cost consultant's London region managing partner, is looking forward to an upturn in development. "Over the past two years, we've seen a lot of developers seeking planning permission on large sites and getting to the point where they can develop."
A couple of years ago, 2006/07 was reckoned to be a good time to complete schemes, but Morrison says that's been pushed back to 2008. Assuming it takes two years to build a non-tower office, then it's a fair bet that schemes will start on site during 2006.
Davis Langdon is involved in developments totalling 30 million ft2, including a number of tower schemes, but as Morrison points out: "Thirty million square foot is not all going to get built at once."
Winning work will be a case of backing the right horse. "As a rule of thumb, about one-third of all planned schemes tend to go ahead," says Mat Oakley, head of commercial research at Savills. Over the next three years, 10 million ft2 will be built in the City and the West End, but proposed schemes that could come to fruition over the next 10 years total more than 30 million ft2.
So, with Savills' help, Building has singled out the 10 developments to watch.
Demand for offices fell dramatically after the dotcom crash - occupation levels for new space in 2002/03 dropped to just one-third of their 2000 levels. Now Savills has reported that the level of vacant space in central London has dropped to 8% at the end of last year, compared with 19% at its peak. In fact, there is a shortage of high-quality city-centre space, which is leading to rocketing rents. Last month, a private equity firm secured £97/ft2 in Mayfair, and when and where rents will break the £100/ft2 barrier is one of the hottest topics on the property scene.
Developers are still reluctant to proceed with schemes without a prelet or an agreement with an occupier to take at least some of the space. But they are now starting to look at speculative development again - with demand and rents so high, developers and their lenders can be more confident that flashy city-centre schemes will stack up. With the equity market still down, property investment also still looks like a safer bet. "Gradually over 2006, our view is that the number of locations where speculative development will be carried out sensibly will increase," says James Brounger, head of consultant CB Richard Ellis' national office agency.
At the Corporation of London, deputy city surveyor Peter Bennett says that it is now seeing more movement on speculative developments with planning permission. "It's getting the a point there there is very little supply left, a lot of schemes are starting because developers have seen the potential in the market."
British Land is developing its 211 Bishopsgate on a speculative basis - with 820,000 ft2 to be completed in 2008 - and head of development Nigel Webb hints that there will be more to come, "if we think the buildings are right for the market".
He also confirms British Land will press ahead with other schemes - at 122 Leadenhall the construction of 600,000 ft2 should start on site in January next year.
Geoff Wright, head of construction at Hammerson, says his firm is starting its first speculative development for three or four years. This is at a £160m office at 125 Old Broad Street, where Bovis Lend Lease has just gone on site.
Although there is consensus that the office market is picking up, industry watchers disagree about the scale and speed of the recovery. Nobody believes that there will be a return to the levels of the boom in the early to mid 1990s, however. "I don't see any danger of a huge bubble leading to a surfeit of property," says the BCO's Richard Kauntz. "We won't return to the market of old, where there were masses of speculative developments, but we'll certainly see more. When you look at the major players, Land Securities, Hammerson, British Land, there's lots of activity."
Joe Valente, head of research at real estate consultancy DTZ, says that rental increases are "reasonable but not striking".
He puts them at about 8-10% - a far cry from the 15-20% of the late 1990s.
Valente agrees that speculative development will begin again. Planning applications and proposals are increasing, and will continue to do so for the period up to 2010, which is widely reckoned to be when the market will peak.
The caution of developers this time round means they'll be passing on more risk to contractors. "As a general rule, more city-centre developments are being procured as a form of guaranteed mixed price contracts," says Davis Langdon's Morrison.
The approach varies from developer to developer. British Land's Webb, for example, says he will continue to use construction management on larger developments, but Gerald Kaye, Helical Bar's development director, dismisses them as "a disaster" and says he will stick with design-and-build. He is also sceptical that guaranteed fixed price offers the best value.
There's also good news for fit-out firms, as developers come under pressure to refurbish tired existing buildings. Employers are increasingly looking at their workplaces as a tool to attract staff. "Supply of good quality offices is falling quickly. People are taking space at the top end and getting rid of poor quality offices," says Brounger at CBRE.
Recovery is also spreading out beyond London, says Catherine Penman, head of research at Knight Frank. "What I think's most interesting are smaller regional offices markets such as Aberdeen, Liverpool, Sheffield and Cardiff. That's where we'll see most growth." Knight Frank's regional office market analysis shows highest growth in rents in Aberdeen and Sheffield, caused by a shortage of space and the attraction of relatively cheap rates compared with larger cities.
Although movements in smaller regional markets are mainly determined by the local economy - the dominance of oil and gas in Aberdeen, for example - it's not only local companies that are building. For example, at Cardiff Riverside, Morley Fund Management is building 460,000 ft2 of office worth £120m and has applied for planning permission for a further 600,000 ft2.
The area of greatest activity will still be the City though, believes Anthony Duggan, associate partner in research at consultant Drivers Jonas. Its latest Crane Survey of development predicts an influx of hoardings and demolition squads over the next six months. Indeed, the Square Mile promises to become one of the country's busiest building sites over the next two years - no fewer than seven of Building's 10 developments to watch will be found there.
1. 40 Portman Square, W1
Developer Delancey has got planning permission for 101,000 ft2 of office space and 18,000 ft2 of residential, and this Squire and Partners design is due for a 2008 completion. But there's no start date as yet and the contractors have yet to be appointed.
2. International House, EC3
This 20-storey tower has been designed by architect Sheppard Robson and would provide 400,000 ft2 of space next to the site of Minerva's proposed 53-storey Minerva Building in Aldgate. Developer Helical Bar are still resolving issues with the planners, but if it does go ahead, it is likely to be under a design-and-build contract.
3. Kings Cross, WC1
Developer Argent is handling London's largest regeneration scheme, which will take place over the next 15 years. There will be more than 5.5 million ft2 of office space, 20 new streets and 10 new public spaces, as well as homes and leisure facilities. The first phase is worth £400m. It has planning permission subject to section 106 agreements and Argent is lining up Carillion, Kier and HBG as main contractors.
4. Broadgate Tower, EC2
British Land's 40-storey, 420,000 ft2 tower is the planned other half of the speculative 211 Bishopsgate development, for which Bovis Lend Lease is construction manager. The cranes arrived on site last week and the shell-and-core construction will begin later this month. Completion is due in 2008.
5. Ropemaker Place, N1
This is currently an empty site crying out for development. What is planned is a 500,000 ft2 tower designed by Gensler Associates. It's got planning permission but no start date as yet - owner DB Real Estate is selling the site so it's unclear whether current developer Helical Bar will take it forward.
6. Heron Tower, EC2
Come 2010, this 46-storey tower will provide 680,000 ft2 of office space and a public restaurant in the roof. The designer is Kohn Pedersen Fox, the developer is Heron and work is expected to start next year.
7 The Shard of Glass, SE1
This has got to be one of the most prestigious projects to get your hoardings round. Renzo Piano's 72-floor icon will be Europe's tallest building and comprise 600,000 ft2 of office space as well as a hotel, prelet to Shangri-La. Developer Sellar has got planning consent, and demolition of the existing building should start at the end of the year. The main contractor has yet to be confirmed - Multiplex is the pre-construction adviser but its travails at Wembley mean it's not a shoo-in for the Shard.
8 Bishopsgate Tower, EC2
This one's smack bang in the heart of the city. It's still in for planning, although the "helter-skelter" as it will probably be known, has already been chopped from 64 storeys to 60 after complaints from the Civil Aviation Authority. It's been designed by Kohn Pedersen Fox and the developer is German fund manager DIFA.
9 Last phase of More London, SE1
There's one plot left next to City Hall, and it's a blank slate while More London Development looks for a suitable tenant to fill up to 400,000 ft2 of office space. Ken Shuttleworth designed the other phases while at Foster and Partners, but now he's at his own practice it's uncertain as to who will design this last phase.
10 The Ark, W6
DEKA is selling this west London landmark and GE Real Estate has been selected as the exclusive bidder for the deal, rumoured to be worth £49.5m. The building, which was designed by Ralph Erskine and completed in 1992, has 150,000 ft2 of office space on 10 floors. It's reported to need a £24m refurbishment, which would include subdividing the large open floorspaces to accommodate multiple occupiers.