Office construction has continued to climb in London, with development reaching a new eight-year high.
The latest London Office Crane Survey by Deloitte Real Estate has recorded 40 new starts, adding 2.8 million sq ft into the development pipeline. That takes construction over the past six months to 14.8 million sq ft, setting an eight-year development high in the capital.
Major office refurbishments, rather than new-builds, are fuelling the wave of activity, accounting for 28 out of the 40 new starts, which “highlights the opportunity that developers can deliver into a market that still has low levels of available office space”, notes Deloitte.
Indeed, the pace of development activity is slowing compared to six months ago, notes the report.
“New construction activity is down 42 per cent from the previous survey, which recorded the highest number and volume in our survey history,” comments Chris Lewis, head of occupier advisory at Deloitte Real Estate.
The greatest number of new starts was in the City. Construction began on 14 new schemes, totalling 1.1 million sq ft, increasing the City’s development pipeline to 8.8 million sq ft. In contrast, the West End and Midtown submarkets have seen construction activity decrease by 25 per cent and 20 per cent respectively over the past six months. This is largely as a result of a number of projects completing and smaller schemes starting.
Will Matthews, head of Insight at Deloitte Real Estate, explains: “2015 and 2016 have been the most active years for new developments in two decades, with 148 schemes totalling 15 million sq ft starting construction. Many of these schemes are now nearing completion, meaning that almost 7.5 million sq ft of offices are due to be delivered between now and mid-2017.”
Lewis adds: “There is 6.1 million sq ft of new space under construction already let. However, occupiers are increasingly adopting a cautious approach to leasing. The total volume of existing office space let in 2016 was down by 37 per cent on the previous year and this is leading to greater choice and competitiveness for occupiers.”Google+