Crane drain: Construction on new London offices slows to five-year low
The number of new construction projects for office blocks in London has fallen by almost half in the last six months, according to data published today.
Work has started on only 24 new schemes totalling 1.8m square feet (sq ft) in the capital over the last six months, compared to 37 schemes totalling 3.5m sq ft in the previous half-year period.
Read more: Student property developer targets London co-living market
This marks the lowest level of new starts for five years, according to the London Office Crane Survey by Deloitte Real Estate.
The total volume of ongoing office construction in central London is 11.9m sq feet across 92 projects, a 10 per cent drop since the last survey but above the long-term average of 10.6m sq ft.
Deloitte Real Estate director Mike Cracknell said that while the figures marked a sharp drop in new starts to office construction, they came hot on the tail of a three-year high.
“These figures indicate a rebalancing of office development, rather than a worrying decline,” he said.
The survey showed that the City remains a hotbed for office construction in the capital. The 5.3m sq ft currently under construction represents 45 per cent of all central London activity.
However, new development has slowed considerably, with only four new schemes adding just 200,000 sq ft to the pipeline in the last six months.
By contrast, the West End has benefitted from a steady increase in construction activity with 11 new starts, including seven refurbishments.
New offices have also broken ground in Midtown – the name given to Bloomsbury, Holborn and St Giles – and the South Bank.
In the last six months 3m sq ft of space was brought to market, up 44 per cent from the previous survey. Almost half of all office space under construction has already been let, showing high demand from occupiers.
The proportion of pre-let space taken by companies in the technology, media and telecoms (TMT) sector rose again to 44 per cent, with TMT firms branching out from London’s traditional tech hubs into areas including the City and Canary Wharf.
Read more: FCA looks to clean up its act amid ‘shameful’ office mess
“Developer and investor sentiment for speculative building is definitely softening as pre-letting is fast becoming a prerequisite for starting construction,” said Cracknell.
“This crane survey suggests developers are taking ‘time out’ but, looking ahead, central London still has 3m sq ft of proposed office space in demolition, which indicates the next survey could see an uptick in new starts, albeit modest.”
Main image credit: Getty