Central London office construction starts hits five-year low

Construction starts of offices in London have hit a five-year low with only 24 new schemes (1.8m sq ft) beginning in the past six months, according to Deloitte’s latest London Office Crane Survey. In the previous the latest biannual survey, construction started on 37 schemes (3.5m sq ft). The total volume of office construction across central London is currently 11.9m sq ft across 92 schemes, reflecting a 10% decline from the previous survey, but still above the long-term average of 10.6m sq ft. Mike Cracknell, director at Deloitte Real Estate, said that the figures “indicate a rebalancing of office development, rather than a worrying decline”. The City of London was still the busiest for construction activity with 5.3m sq ft under construction, representing 45% of all central London activity. However, new development has slowed with only four new schemes adding just 200,000 sq ft into the development pipeline. Cracknell added: “The City is notably quiet with only one new-build office and three refurbishments commencing construction. This is significantly down from 1.2m sq ft across 11 schemes we reported in our last survey.” Meanwhile, the West End has been experiencing a steady rise in construction activity with 11 new starts, including seven refurbishments, commencing in the last six months. The West End now has 35 offices under construction, which are set to add 2.2m sq ft of office space to market. Midtown and the South Bank have both seen an increase in construction activity this survey with four and three new offices breaking ground respectively. The survey of developers and landlords showed that they are less optimistic about future leasing demand than they were six months ago. “Developer and investor sentiment for speculative building is definitely softening as preletting is fast becoming the prerequisite for starting construction,” Cracknell said. “This crane survey suggests developers are taking ‘time out’ but, looking ahead, central London still has three million sq ft of proposed office space in demolition, which indicates the next survey could see an uptick in new starts, albeit modest.” To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette