There is a striking mismatch between where offices are needed in the UK and where they are being built, research shows.
A report published by Centre for Cities, and supported by the British Council for Offices, found that office space has not responded to demand.
According to the report, towns and cities which had higher rates of office based employment in 1998 performed better over the subsequent decade, across a range of economic indicators.
To help the country recover, the think-tank say is is essential that “buoyant” towns and cities with dynamic economies have enough offices to support businesses to grow.
It highlights that some of our strongest small to medium sized town and city economies, have seen the lowest net floorspace growth over the last decade.
In 8 out of 10 of these fast growing locations, such as Reading and Aldershot, demand far outstrips supply.
Here, it costs on average 50% per square metre more than the national average to lease an office for a year, yet the rate of office building has not responded to these high prices, as the increase in office space in most of these cities has been well below the national average.
On the other hand, more fragile economies in Bolton and Blackburn have seen the most growth in floorspace, despite having much weaker property markets.
Andrew Carter Director of Policy and Research at Centre for Cities said: “Some of the UK’s most dynamic towns and cities are not meeting demand for office space and this could ultimately hinder the growth prospects in those places.
“In a time of national economic uncertainty, smaller, dynamic city economies will play a key role in kick starting future growth.
“Without adequate quality office provision in these cities the service sector, likely to be instrumental on the road to recovery, will not be supported to grow. Local government and the property industry must work together to address this issue as a priority.”
The research suggests two reasons why smaller cities are not seeing the growth in office space needed to meet demand.
Firstly, planning restrictions will only allow new office developments in certain places; and bigger cities are less risky for investors and developers.
Richard Kauntze Chief Executive of BCO said: “This report highlights the importance of offices to the growth of towns and cities and to the economic recovery of the UK as whole.
“It also shows that many UK towns and cities with best potential for growth are being held back by a lack of suitable office space.
“This is a missed opportunity. Well designed, flexible office space, let on flexible terms will help drive growth now and in the future.”
The report recommends that cities with high demand for offices need to make a better case to the property industry, to ensure that its key players are more aware of local development opportunities.