The London Office Crane Survey - Summer 2015
Appetite for construction
The latest Crane Survey reveals that the total level of office construction in central London has increased over the past six months, fuelled by the greatest volume of new space to start since 2011.
Current market conditions still suggest a short-term supply shortage. The ramping up of new developments over the last six months has come too late to significantly alter the delivery of new space in 2015.
- Office construction in central London rises for the first time in 18 months
- 31 new starts have been recorded
- Growth across all but two central London submarkets
- 12% rise in volume of let space under construction
- 2014 completions reach highest level since 2003
With a rise of 24% over the past six months, a new wave of office construction in central London is under way across almost all submarkets. This comes at a time when the level of available office space is at its lowest for seven years.
- 9.5 million sq ft of space under construction across central London over the past six months.
- 31 new starts have added 4.4 million sq ft to the pipeline.
- 3.4 million sq ft is scheduled to complete in 2015.
- 6 million sq ft of space under construction is available to let – a 31% rise over the past six months.
The view from Deloitte
“While 2015 will be subdued with regard to the level of space completed, we believe that the volume of space under development will rebound further from now through to 2019.
“As the tenant diversification of markets accelerates, available product choice is enabling and even encouraging firms to move to different parts of London, and a change in working practices is impacting what tenants need from their buildings.”
Steve Johns, Head of City Leasing, Deloitte Real Estate
Where is the building happening?
The City: 10 new buildings started on site, accounting for 39% of all the new space being constructed.
West End: 11 new starts, with a total of 0.9 million sq ft.
Midtown: six new starts.
Docklands: one new start.
King’s Cross: three new starts.
- Property companies are developing 50% of the space under construction, down from 60% in our last survey.
- Institutional developers have started two-thirds of the new space.
- TMT occupiers have leased 49% of the space under construction.
- The financial sector has leased 25%.
The balance tilts back to office from residential: growth in residential values has slowed while office rents and yields have improved. This could reduce the number of sites lost to non-office developments.
Shift in developer mix: the prominence of REITs has started to reduce while institutional activity grows.
Change in submarket definition: boundaries are spreading, with the City extending beyond the EC postcode and growing potential for development outside the confines of central London.
What's the outlook?
The rise in office construction has come too late to make a significant difference to the amount of space due to be delivered in 2015. New office space remains limited and a sizeable share is already pre-let.
But in coming years – 2016, 2017 and 2018 – there’s likely to be a marked increase in the amount of space completed. The potential increase in supply will be felt at different times in different parts of central London. It will come soonest in the West End in 2016, whereas in the City it will come later in 2019, and in the other markets the increase is expected in 2018.
Have a look through previous editions of the London Office Crane Survey to see how office development in London has changed over time.
About the report
The Deloitte Real Estate London Office Crane Survey is the definitive survey of commercial construction in central London. This edition covers the six months to 31 March 2015.
The survey measures the volume and impact of office development (new build or significant office refurbishment of 10,000 sq ft) across central London over the next five years, and is widely used as a barometer of developers’ sentiment and future office supply.