The amount of office space under construction in London’s core business areas has risen by almost one-quarter in the six months from October to March, according to a new survey
Deloitte Real Estate’s latest London Office Crane Survey says 880,000m2 of office space was currently under construction across the City, West End, Midtown, Docklands, Southbank, and Paddington submarkets - representing an increase of 24 per cent.
Of those, Deloitte said 31 were new starts – set to account for 408,000m2 of floorspace. One third of the new starts are speculative builds.
The largest new start is the 27-storey, 64,000m2 KPF-designed 1 Bank Street building in Docklands.
The survey only looks at schemes set to provide 1,000m2 or more of space.
The latest results follow a series of falls in the rate of office construction, with the a 17 per cent drop in work during the previous April-September period in 2014. (See story below.)
Steve Johns, Deloitte’s head of City leasing, said the increase in new starts was the second-highest in two decades.
‘A third of this space has already found tenants, leaving 22 of the new starts as speculative development schemes,’ he said.
‘There is no need to sound the alarm bells just yet as the development pipeline is only slightly above the average level of activity recorded in the past 10 years.’
Johns said new starts in the Midtown area had increased by 44 per cent since the last survey, but added that the greatest proportion of new starts was in the City.
The report warns developers that the nature of demand for central London office space is changing, with ‘dramatic’ growth in requests for serviced office space. It warned that buildings that could not be adapted to suit such requirements risked becoming functionally obsolete much earlier than might otherwise be the case.
Outside of London’s core business districts, the report looked to Stratford, Battersea/Nine Elms, and White City as growth areas capable of supplying 650,000m2 of new office space in the coming years.
Top 10 developers
- Land Securities
- Canary Wharf
- WRBC Development
- Derwent London
- Oxford Properties
- Kings Cross Central Limited Partnership
Previous story (AJ 12.11.2014)
Office construction falls 17% in London
Office construction in London has fallen 17 per cent over the six months to September, according to Deloitte
The total volume of office space under construction in London fell for the third time in a year, dropping to declining to 7.7 m sq ft over the six months, according to results from the firm’s latest London Crane Survey.
But the AJ’s sister title Construction News reported that completions reached a 10-year high over the same period, with 3.7m sq ft being completed.
Rafael Viñoly’s 20 Fenchurch Street and Rogers Stirk Harbour + Partners’ Leadenhall Building, popularly known as the Cheesegrater, were the main contributors to this space.
Less than half of this new space is available to let, with most having been leased out prior to the buildings’ completions.
The main hotspot of activity for new office construction was in the City, where there are 10 new buildings under way that account for 54 per cent of office construction in central London.
By contrast, there were no new starts in the Southbank, Midtown and the Docklands over the six months – the first time there has been no activity in Midtown for four and a half years.
Demolition increased by 18 per cent over the period, growing from 4.5m sq ft being demolished to 5.3m sq ft. Demolition in Midtown rose by 50 per cent over the same timeframe, suggesting more construction may be on the way.
Deloitte said that, as 2014 is the peak of the latest cycle of office development, with very few schemes committed to complete in the short term, there would be a low volume of floorspace being delivered in 2015.
According to Deloitte’s forecasts, the office development pipeline will not recover to 2014 levels until 2018. However, the firm argues that demand will remain robust and there will not be oversupply in the office sector.
“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,” Deloitte Real Estate head of City leasing Steve Johns said.
“Nevertheless, with over 5m 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.”