Highest Level Of New London Office Starts Since 2005
Deloitte’s latest London office crane survey sees the highest volume of new offices being built since 2005.
The study was extended to cover seven central London areas and reveals that there are currently 124 schemes are under construction totalling more than 15m square feet in volume in the West End, Midtown, Southbank, Docklands, Kings Cross and Paddington with The City leading the way. This represents a nine per cent increase on the total construction volume of 14.4 m sq ft recorded in the last survey.
Deloitte Real Assets Advisory Director Sophie Allan said: “New builds have roared back from their post-pandemic nadir, which has likely been driven by large pre-lets and growing developer confidence in the demand for premium office space.”
The winter survey has seen the start of five large schemes of 300,000 sq ft and more accounting for 40 per cent of the new start volume. At nearly six per cent higher than the volume recorded in the last survey and with seven fewer schemes starting, the average new scheme rose to about 119,000 sq ft, from 88,000 sq ft previously.
The period has also recorded about four million sq ft of completed office space across 45 schemes in central London. More than 60 schemes with a total volume of about six million sq ft are expected to be completed by the summer survey next year.
Allan added: “The future will see further skyscrapers added to the City’s skyline, with three large developments recently obtaining planning permission.”
Refurbishment starts have broken records for the second consecutive survey, comprising 34 schemes covering 3.3 million sq ft. The increase in refurbishments has been driven by the anticipated tightening of minimum energy efficiency standard regulations, coupled with demand for premium-grade office space which aligns with tenants’ sustainability commitments.
Deloitte Chief Insights Officer for Financial Services and Real Estate Margaret Doyle said: “Demand for premium office space is still fuelling rising construction new starts this year, but supply chain issues and other construction delays may continue to affect completion dates.
“Interestingly, developers we have spoken to seem to be more concerned about the supply of, rather than demand for, premium space. With the increased volume of new starts and completions reported this year, there is a healthy amount of prime office stock on its way to the market.”
But despite this Doyle said the macro-environment for the London office market remained challenging.
“The current economic and geopolitical backdrop implies significant uncertainty about the future path of energy prices, inflation, and interest rates.
“But for now, developers seem prepared to bet that, if they build premium office space, the metropolis will continue to attract occupiers.”
The survey suggests that the City of London has bounced back, with 2.4 million sq ft of office space starting across 16 schemes. This includes two large new build starts and the largest refurbishment start of the survey. Together these schemes represent almost 1.4 million sq ft of new starts. These developments are in line with the City’s historical trend of hosting large-scale new builds, over 500,000 sq ft, with sizeable floor plates.
Comparatively, new starts in the West End have declined by 13 per cent over the last survey to 1.1 million sq ft. This is in part due to a few developments completed during this survey period, as it continues to show strong levels of activity. Southbank has recorded an increase of 19 per cent this survey period, largely driven by a 385,000 sq ft refurbishment.
Deloitte’s London crane survey is conducted twice a year and measures new builds or significant office refurbishments of 10,000 sq ft or more.
Credit - www.fmj.co.uk
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