As demand for office space increases for the first time in nearly three years, we examine the significance for the hibernating commercial sector. In particular, when will it translate into new buildings?
The first steps of recovery in the commercial market may be tentative, but are as significant for the construction industry as they are for a 12-month-old baby.

Research released last week by the RICS showed that tenant demand for commercial property in the last three months of 2003 increased for the first time in 11 quarters. The slump hit construction hard. For example, multidisciplinary consultant Mouchel (now Mouchel Parkman) reorganised its entire business to focus on public sector projects, and now gets more than 80% of its work from the government.

Milan Khatri, chief economist at the RICS, said: "There are early signs of the office market picking up, particularly in London and, to a certain extent, the South-east. At the moment vacancy rates can absorb the increased demand, but in a year or two when vacancies have been filled, it will have an impact on new-build construction activity."

However within the next six months, the increased activity will be translating into orders for interior firms, quantity surveyors and architects. Mike Foster, an analyst at KBC Peel Hunt, said: "This will help guys like Morgan Sindall and Interior Services Group."

Interior specialist Skansen confirmed that enquiries by developers for their services have increased recently. Director James Pack, though, is less concerned by the level of interest than the number of deals actually signed: "There have been more enquiries since September, but it is a question of speed and the likelihood of this being translated into companies doing deals and firms justifying the property spend. I'm very positive."

Quantity surveyors have confirmed that they have been commissioned to do some early planning for the resurgent commercial market. Peter Vince, managing director of AYH, said potential schemes were coming across his desk at a more frequent rate. "We've seen things picking up mainly in the provincial cities: Birmingham, Manchester and Leeds. The green shoots of new life are in the London market. We've done planning cost on potential schemes, but not live projects yet. We think there might be new London projects in the third or fourth quarter this year."

But Robin Partington, director at architect Hamilton Associates, warned contractors that work on new office schemes was unlikely to start for at least a year. The news is better for front-end firms such as architects. "The developers are looking at their sites afresh," said Partington, who hints that he is starting work on new office designs.

There have been enquiries … I’m very positive

James Pack, director, Skansen