London office latest 12th November 2014

Office development in London is beginning to flourish with 22 new schemes totalling 2.1m sq ft starting construction in six months - almost double the volume of new space started compared to the previous six months, according to Deloitte's London Office Crane Survey.

Steve Johns, head of City leasing at Deloitte Real Estate, said: “The sharpest rise in construction starts is in the City of London, where 10 new office buildings are now underway. This includes over a million sq ft in the City core and over 500,000 sq ft in ‘tech city’, accounting for three quarters of the volume of space across all the new schemes we’ve recorded. The West End has also seen 10 new starts, adding 462,000 sq ft to the development pipeline, while Southbank, Midtown and Docklands have seen no new construction this survey.” The crane survey reveals that despite this rise in the number and volume of new schemes, the total amount of office space under construction in central London is down to 7.7m sq ft. This is below the long-run average delivery of around 10m sq ft, partly due to the 3.7m sq ft of office space completing since the last survey.

Johns continues: “Office construction is down 17% in the last six months, but we have seen 3.7m sq ft of completions over the last six months, a 10 year high. To put that into context, a third of this space is within two City towers, with the remaining space across 22 central London buildings. However, 58% of this space was leased before completion, demonstrating the strength of occupier demand. Similarly, of the total 7.7m sq ft of space under construction, 41% is already let. Despite a healthy pipeline of activity, 2015 is likely to deliver the lowest volumes of space in 20 years.

“With occupier demand expected to remain strong we foresee further increases in pre-letting activity, and demand for the best space to exceed new supply for the next three years. Nevertheless, with over five million sq ft now being demolished - a rise of 18 per cent in six months - developers are racing against the clock to deliver buildings while new supply remains relatively low.”