Central London office development hits three-year high

Construction of new offices in central London is at its highest level in three years, with 13.2m sq ft currently being built, according to Deloitte Real Estate’s latest London Office Crane Survey. In the last six months, the latest biannual survey recorded 37 new schemes breaking ground, adding 3.5m sq ft into the development pipeline and pushing the total volume under construction from the last survey up by 12%. Around half (51%) of the total volume of construction across the capital is in the City of London, equating to 6.7m sq ft across 33 schemes. Of this, eight are refurbishments, which will deliver 800,000 sq ft of space. However, Argent starting on the development of 611,000 sq ft of space at King’s Cross, already fully prelet to Facebook, helped boost the figures; and office development is up 10% in the West End on the previous survey, with 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. Growing confidence Deloitte said the amount of construction activity being embarked upon showed that developers had delayed plans but now had confidence in the leasing market, which last year saw more than 13m sq ft let. The average size of these new developments has increased from 80,000 sq ft to 96,000 sq ft in this survey. In addition, Deloitte reported that, of the 13.2m sq ft under construction, more than half (55%) is prelet, with 78% of schemes over 100,000 sq ft already committed to. Notably, occupiers in the financial services sector have prelet 2.1m sq ft of space that is still under construction. This is a 50% increase in six months and suggests there is confidence that the sector remains committed to London. However, the technology, media and telecoms office occupiers were still the top takers of space during the period, preletting 2.4m sq ft, up 24% from the previous survey. Serviced office providers were the third-largest occupier, preletting 700,000 sq ft. This uptick in construction activity may not last, though, with Deloitte’s survey indicating 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 with 39m sq ft in 2017. 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. “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.” To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette Photo: London From The Rooftops/Shutterstock