Appetite for construction – London office development up by a quarter
19 May 2015
Office construction in central London has grown by 24% in six months, taking the total office space now under development to 9.5m sq ft. The latest London Office Crane Survey by Deloitte Real Estate has recorded 31 new starts contributing 4.4m sq ft into the 9.5m sq ft development pipeline.
Steve Johns, head of City leasing at Deloitte Real Estate, says: “Developer sentiment is continuing to improve and this is good news for London’s diverse occupier base. The increase in new starts is the second highest we’ve recorded in 20 years. Nevertheless, a third of this space has already found tenants, leaving 22 of the new starts as speculative development schemes. There is no need to sound the alarm bells just yet as the 9.5m sq ft development pipeline is only slightly above the average level of activity recorded in the past 10 years. Of this, 37% is already pre-let.”
All but two of central London’s submarkets are sharing the growth. The City is powering forward with 10 new construction starts (1.7m sq ft) accounting for 39% of all new activity started in this survey, and just under half of all pre-let development taking place across central London. The West End has seen a 24% rise in activity driven by 11 new starts in six months. “In addition to stronger West End activity, a significant increase has been seen in Midtown,” explains Johns. “Following a flat-line, Midtown has ramped up construction volumes by 44% with six new starts in anticipation of the imminent infrastructure improvements.”
Anthony Duggan, partner and head of real estate strategy at Deloitte, said: “We are now seeing the start of the supply response the market has been expecting. All thanks to the robust economic conditions, strength of London as a global city, tight existing office supply and high levels of leasing deals being transacted.
“However, this increase in activity will not come in time to alter the very tight supply dynamics the office market is currently experiencing. We expect further rises in rents and more pre-let deals on schemes under construction as tenants compete for the limited amount of available space. Looking further ahead, we expect the development pipeline to continue to increase as developer confidence translates to more active construction sites across London.”
Notes to editors
About the London Office Crane Survey
*Corrections in Draft Crane Survey Report:
Page 10 Midtown – 2016 pipeline colours incorrect.
Page 18 – correct text should read “tenants have moved from a combined total of 2m sq ft to 3.5m sq ft.”
Deloitte Real Estate’s London Office Crane Survey is the definitive review of commercial construction in central London, and is seen as a barometer of developer sentiment and future office supply. The report measures the volume and impact of office development (new build, or significant office refurbishments, of 10,000 sq ft or more) currently taking place across central London and analyses the pipeline of future development over the next five years.
The London Office Crane Survey is published every six months, with the last edition released in November 2014. The data in this report is correct as at 31st of March 2015, and covers seven major central London office markets: The City, Docklands, King’s Cross, Midtown, Paddington, Southbank, and the West End.
Deloitte Real Estate’s collection of central London development data commenced in 1982, and the first London Crane Survey was published in 1996.
Deloitte Real Estate’s commercial property research team is focused on producing thoughtful and insightful publications, as well as comprehensive bespoke reports for investors, developers and occupiers. www.deloitte.co.uk/cranesurvey
About Deloitte Real Estate
Deloitte Real Estate redefines the concept of a full-service real estate business, offering a breadth of capability and an innovative approach unequalled in the market.
Our team combines traditional property services with financial and business advisory expertise to deliver integrated solutions on the most simple assignment to the most complex. We apply a depth of insight drawn from our understanding of all industries and sectors to advise occupiers, lenders, investors and the public sector on every aspect of real estate in an increasingly complex world.
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.