The construction of new offices in London is at its highest level in three years, according to Deloitte Real Estate’s latest London Office Crane Survey
The latest biannual London Office Crane Survey recorded 37 new schemes breaking ground in the last six months adding 3.5m sq ft into the development pipeline.
The total office space under construction in London is 13.2m sq ft – a 12% increase on the previous survey.
Mike Cracknell, director at Deloitte Real Estate, said: “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.”
The average size of new developments increased from 80,000 sq ft to 96,000 sq ft this London Office Crane Survey and King’s Cross boasted four new starts representing a 26% share of all new starts.
Meanwhile, the City of London continues to dominate construction activity with 6.7m sq ft across 33 schemes. This is over half (51%) of the total volume across the capital. The City has also seen a shift in favour of large-scale refurbishments versus new builds as developers began work on eight refurbishments which will deliver 800,000 sq ft of Grade A space.
Office development in the West End is up 10% on the previous London Office Crane Survey and currently has 1.9m sq ft under construction across 27 schemes.
Cracknell continued: “Quite simply developers would not start construction if the demand for leasing offices was not there, or expected to be there, especially in the submarkets outside of the City, West End and Midtown.
“Over half (55%) of the office space under construction is already let and for larger schemes over three quarters (78%) is already committed to. Notably occupiers in the financial services sector have pre-let 2.1m sq ft of space that is still under construction. This is a 50% increase in six months and suggests there is confidence the sector remains committed to London.”
Cracknell added: “Aside from the current higher than average construction levels, we look ahead into the future development pipeline of all proposed and planned office schemes.
“The survey indicates a reduction in the future supply of Grade A space as the pipeline has declined by 23% over the last two years and currently stands at 30m sq ft, compared to 39m sq ft in 2017. This could point to a more competitive pre-letting environment over the coming years as the future supply of office space slows.”