Construction of new London offices at three-year high has been saved
Construction of new London offices at three-year high
20 May 2019
- 13.2m sq ft of office space under construction – up 12%
- 3.5m sq ft of new starts in six months
- Over half of the office space under construction already let
The construction of new offices in central London is at its highest level in three years, according to Deloitte Real Estate’s latest London Office Crane Survey, published today. The latest biannual survey recorded 37 new schemes breaking ground in the last six months adding 3.5m sq ft into the development pipeline.
The total office space under construction in the capital is 13.2m sq ft – a 12% increase on the previous survey.
Mike Cracknell, director at Deloitte Real Estate, said: “London’s office market remains resilient in the face of uncertainty as we witness an encouraging increase in new construction starts. This is testament to developers’ continued confidence in London’s office leasing market long-term.”
The average size of new developments increased from 80,000 sq ft to 96,000 sq ft this survey and King’s Cross boasted four new starts representing a 26% share of all new starts.
Meanwhile the City of London continues to dominate construction activity with 6.7m sq ft across 33 schemes. This is over half (51%) of the total volume across the capital. The City has also seen a shift in favour of large-scale refurbishments versus new builds as developers began work on eight refurbishments which will deliver 800,000 sq ft of Grade A space.
Office development in the West End is up 10% on the previous survey and currently has 1.9m sq ft under construction across 27 schemes. Midtown and King’s Cross also experienced a rise in construction levels, increasing their square footage under construction by 7% and 65% respectively.
Cracknell continued: “Quite simply developers would not start construction if the demand for leasing offices was not there, or expected to be there, especially in the submarkets outside of the City, West End and Midtown. Over half (55%) of the office space under construction is already let and for larger schemes* over three quarters (78%) is already committed to. Notably occupiers in the financial services sector have pre-let 2.1m sq ft of space that is still under construction. This is a 50% increase in six months and suggests there is confidence the sector remains committed to London.”
Technology, media and telecoms (TMT) office occupiers have also increased pre-let activity with 2.4 million sq ft – up by 24% from the previous survey. Serviced office providers are the third largest occupier sector pre-letting office space in central London with 700,000 sq ft spoken for.
Cracknell added: “Aside from the current higher than average construction levels, we look ahead into the future development pipeline of all proposed and planned office schemes. The survey indicates a reduction in the future supply of Grade A space as the pipeline has declined by 23% over the last two years and currently stands at 30m sq ft, compared to 39m sq ft in 2017. This could point to a more competitive pre-letting environment over the coming years as the future supply of office space slows.”
Note to editors
About the London Office Crane Survey
Deloitte Real Estate’s London Office Crane Survey was first published 23 years ago, and is updated every six months with the last survey published in November 2018. The data in this report is correct as at 31 March 2019.
The crane survey covers seven major central London office markets known as submarkets: The City, West End, Docklands, King’s Cross, Midtown, Paddington, Southbank, as well as three emerging submarkets: Vauxhall-Nine Elms-Battersea, White City and Stratford.
* larger office schemes = over 100,000 sq ft.
The long term construction average of 10.6 million sq ft – average taken from Q1 2002 to Q1 2019.
Deloitte Real Estate’s collection of central London development data commenced in 1985, and the first London Crane Survey was published in 1996.
The crane survey is the definitive review of office 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 crane survey also features a ‘Construction Cost and Workload Survey’ – a survey of main and subcontractors’ sentiment to issues such as price, workload and labour.
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