London office completions lag due to site delays as demand for projects surges
Supply chain disruption and worker shortages mean the completion of office construction projects in London has lagged.
New start activity dropped by a third to 2.3m sq ft over the six months to March.
Completed construction also plunged by half to 1.7m sq ft, well below a long-term average of 2.5m sq ft, as projects were plagued by site delays.
“A raft of delays, partly driven by supply chain disruption and labour shortages, contributed to a lag for developments to complete,” Mike Cracknell, director in real estate at Deloitte explained.
It comes as demand for projects in the capital has soared, according to the Deloitte London Office Crane Survey.
The volume of construction in the six month period had increased four per cent to 13.5m sq ft, above the 10-year average.
Completions in 2022 are expected to reach at least 7m sq ft, standing at the highest level since 2003.
Overall, 36 schemes launched in the six months to March, well ahead of a long-term average of 27.
“The market is displaying resilience with appetite amongst investors remaining strong. This coupled with occupier demand is contributing to confidence in the city,” Cracknell added.
31 out of the 36 aforementioned schemes include comprehensive refurbishments, reflective of firms’ evolved needs for office spaces after the pandemic.
“We can expect to see continued growth in refurbishment activity to address value erosion caused by accelerating obsolescence and occupier choice,” Philip Parnell, real estate valuation and ESG lead at Deloitte, added.
While brand new developments were set to continue with pace, “the drivers and increasing preference to refurbish, re-use and recycle are clear,” Parnell said.