London office completions hit 14-year high
Office space under construction in London fell 13% between April and September, though completions hit a 14-year high, according to Deloitte Real Estate’s latest London Crane Survey. Some 11.8m sq ft of office space is under construction in central London, showing a decline on Deloitte’s previous report, although it is above the capital’s long-term average of 10.5m sq ft.
The number of new starts between April and September rose 23% from the last report, hitting 32 construction starts. However, the volume of space in those new starts fell 17.6% to 2.6m sq ft with the average size of developments falling to 80,000 sq ft. Deloitte said the decline in construction activity was driven by both the fall in new starts and a significant rise in completions.
Office space under construction in London fell 13% between April and September, though completions hit a 14-year high, according to Deloitte Real Estate’s latest London Crane Survey. Some 11.8m sq ft of office space is under construction in central London, showing a decline on Deloitte’s previous report, although it is above the capital’s long-term average of 10.5m sq ft.
The number of new starts between April and September rose 23% from the last report, hitting 32 construction starts. However, the volume of space in those new starts fell 17.6% to 2.6m sq ft with the average size of developments falling to 80,000 sq ft. Deloitte said the decline in construction activity was driven by both the fall in new starts and a significant rise in completions.
A total of 4.2m sq ft of offices completed in the six-month period – the highest amount since Q1 2014 and more than double the previous report. Mike Cracknell, director in the capital projects advisory team at Deloitte Real Estate, said the numbers in the report reflect a “fairly complex picture” of London.
He added that activity has dipped, which has not been a surprise considering the dip in lettings after the Brexit referendum in 2016, but it has remained above the long-term average by most metrics.
Cracknell said: “It seems to be generally progressing quite well. There are some things on the horizon that might derail that – whether that be a global recession or things more local, or just the difficulty of finding sites.
“There are a number of hurdles, some of which are new and some of which are constant – but maintaining momentum is where we’re at.”
The City vs the West End
The City continues to be the focal point of construction in London, with more than half of all office construction – and 75% of all new-build starts – located in the submarket. But activity has slipped 13% to 6m sq ft since the previous London Crane Survey.
In the West End, however, activity is picking up. Where previous surveys have shown a lull in construction, the latest report showed the number of new starts doubling to 12 – two shy of the record 14 in 2017. Though nowhere near the City’s levels, office development rose 28% in six months to 1.7m sq ft.
Pre-let to tech
Almost half (49%) of all space under construction is already pre-let across central London, led by the outer submarkets. Occupiers have already committed to all the space coming out of the ground in King’s Cross, while 91% of the South Bank’s pipeline has attracted tenants. This reflects the changing demand for space among occupiers.
Cracknell said: “There’s a general trend that the fitting out of space these days is a bit more complex. “If you’re going to do a clever fit-out that makes use of technology and provides the working environment that staff are looking for, to get the right space you need to commit fairly early.
“The idea of getting the space at the last minute and quickly moving in is thwarted by the complexity of getting the space right.”
TMT occupiers have pre-let 28% of space under construction in the capital, overtaking financial services as the most active sector in London. Finance, which accounted for as much as 46% of pre-let space last summer, fell to 24%.
