According to Deloitte, London office construction levels have reached a three-year high, with 37 new schemes in the development pipeline, reflecting a 12% increase on previous years.
The London Office Crane Survey responsible for these figures, covers seven major central London office markets – The City, West End, Docklands, King’s Cross, Midtown, Paddington and Southbank, in addition to Vauxhall-Nine, Elms-Battersea, White City and Stratford.
The City of London dominates office construction, covering 6.7 million sq ft across 33 schemes, and accounting for more than half the total volume of construction activity. Kings Cross additionally boast a 26% share of the new developments.
Director at Deloitte Real Estate said about this peak in construction: “London’s office market remains resilient in the face of uncertainty as we witness an encouraging increase in new construction starts. This is testament to developers’ continued confidence in London’s office leasing market long-term”.
“This is a 50% increase in six months and suggests there is confidence the sector remains committed to London”.
Over half of the London office construction taking place has already been let
Additionally, over three quarters of the larger schemes have already been committed to. The finance sector in particular have pre-let approximately 2.1million sq ft – demonstrating the commitment to the City.
According to British Land, the mentioned development projects are facing less competition resulting in their rapid lease rates, even though they are not due to be fully completed until 2020.
This is a welcome development considering London office construction ground to a halt following the Brexit vote. Robert Buchele, a director at Savills reported: “Across Central London, the appetite for development and refurbishment opportunities is almost unabated – investors are ready to assume the greater risks of speculative development as they seek higher returns”
Despite this initial flatline in London office construction, Deloitte noted in their November survey that office space in London would continue to generate demand, especially from technology, media and telecom sectors.
These new figures show the surprising resiliency of London’s office market and serve as a glimmer of hope for London construction post-Brexit.
Read more on the high levels of office take up in London in our previous blog post.