The Notebook: Jo Streeten goes back to her old university
The notebook is a place for interesting people to say interesting things. Today, it’s the turn of Jo Streeten, managing director at AECOM.
London’s commercial real estate sector has endured some of the steepest construction cost rises since I’ve been in the business, but we’re starting to see the market stabilising. Our new market forecast till the end of 2023 shows that tender price inflation for building work, covering materials and labour costs, is easing.
Tender price inflation for building work is easing
The rate of price inflation has fallen each quarter from a 24 year high of 11.6% in Q4 2022. AECOM is now forecasting that tender prices will increase by 3.1% over the next 12 months to Q4 2024. This is good news for London property developers, who have seen steep construction cost rises affect the viability of new buildings over the last two years.
Project starts and new orders overall are faltering on most measures, whether month-on-month, compared with the same point in time a year ago, or in nominal terms. Beyond 2023, we forecast that there will be a discernible impact to future output as a result of changing trends in the flow of new work and new orders.
For example, we are yet to see the full impact of repeated interest rate rises filtering through to different construction sectors and construction output.
This change in the speed of price inflation will alleviate some of the cost pressures afflicting many projects through much of 2023 but it is likely too late to benefit the high number of firms already struggling or entering administration this year.
Next year we’re expecting project starts and new orders to falter despite the falling rate of inflation as tighter financial conditions lead to a deterioration of demand and impacts many sectors of the economy.
Preserving Iconic Landmarks
I recently took my mum for afternoon tea at The OWO, London’s latest luxury hotel. The Old War Office, as it was once known, was used by many notable Secretaries of State for War, including Churchill and John Profumo before he lost his job after his affair with Christine Keeler.
Our engineers have worked hard over the past few years to preserve this important landmark as they bought it up to modern standards, but it is not the only well-known office in London in need of a revamp – by a long way. We’re working with developers throughout London to make their real estate more sustainable. Some of these buildings are not even a decade old.
Most of the work is a complex analysis of operations and structures, but here’s one very simple tip: turn all the lights off at night. If no one is using the office, there’s no need to keep them on and it’s a waste of energy.
Back to university
One of the biggest challenges I have as a managing director is ensuring we have the right balance of talent throughout the business. About 40% of AECOM’s early careers intake are women and according to Engineering UK about 16.5% of all engineers are women, which indicates that at least numbers are improving at the entry point to our sector.
I recently returned to King’s College London to look at The Quadrangle redevelopment as our engineers were part of the delivery team. The mix of students in new labs for engineering research and teaching are a far cry from my undergraduate days there, where I was one of only one in ten women in the old lecture halls – we’ve a long way to go in terms of gender diversity but it’s heartening to see progress.
Getting Euston back on track
The construction industry is coming to terms with the impact of Prime Minister Rishi Sunak’s decision to scale back High Speed 2 and what this means for Euston station and the surrounding area. Wherever we see major new rail infrastructure and stations, we see the potential for redevelopment and regeneration because rail investment creates jobs, economic growth, and housing. We’ve seen that at Kings Cross and it’s already happening around Old Oak Common in west London and as a proud Londoner, I’d love to see Euston given a new lease of life.
For Euston, it will require compromise from all sides to move the project forward, but we must keep our options open too – we need a design that will be fit for the next century. There are important elements to consider like protecting the views from Primrose Hill to St Paul’s as well as the impact on the station of building over it.
But Euston has so much going for it: it’s in London’s Knowledge Quarter, there’s a huge need for housing, retail and commercial office space. We should be excited about what can be done.