Occupier demand 'remains strong' in London office market

The amount of new office space being developed in London has almost doubled over the last six months, in comparison to the previous half-year period, according to Deloitte Real Estate.

The London Office Crane Survey compiled by the business advisory group shows that a total of 22 new schemes covering 2.1 million sq ft were started in the capital over the latest half-year.

The research team found that this is nearly double the total volume of new space which was taken forward over the previous six months.

Supply concerns remain

Despite the findings, Deloitte also said that central London has recently seen its total volume of office space under construction fall to just 7.7 million sq ft.

Previous surveys have recorded a long-run average of roughly 10 million sq ft.

In response to this, Deloitte said the recent completion of office space covering 3.7 million sq ft may have had a downward impact on the latest figure.

City of London leads the way

Deloitte Real Estate’s head of City leasing, Steve Johns, said work on 10 new office developments has now begun in the City of London, meaning it is the region benefiting from the steepest jump in new construction projects.

He added:

“This includes over a million sq ft in the City core and over 500,000 sq ft in ‘tech city’, accounting for three quarters of the volume of space across all the new schemes we’ve recorded.”

Mr Johns said a total of 10 new starts have also been witnessed in the West End of the capital.

Strong occupier demand

Looking at London’s wider office construction trends, the expert said occupier demand remains strong.

He said: “Of the total 7.7 million sq ft of space under construction, 41% is already let. Despite a healthy pipeline of activity, 2015 is likely to deliver the lowest volumes of space in 20 years.”

Over the next three years, it is now likely that demand could outstrip supply when it comes to the “best space”, Mr Johns said.

He concluded that developers face challenges in meeting occupier demand, as a result of relatively low levels of new supply and the fact that more than five million sq ft of space is set to be demolished.

------------------------------------------------------------------------------

Copyright Press Association 2014