London office construction up 24%
Office construction in central London has grown by 24% in six months, taking the total office space now under development to 9.5m sq ft, according to the latest London Office Crane Survey by Deloitte Real Estate.
The survey, which was published today, has recorded 31 new starts contributing 4.4m sq ft into the 9.5m sq ft development pipeline.
Steve Johns, head of City leasing at Deloitte Real Estate, said: “Developer sentiment is continuing to improve and this is good news for London’s diverse occupier base. The increase in new starts is the second highest we’ve recorded in 20 years.
“Nevertheless, a third of this space has already found tenants, leaving 22 of the new starts as speculative development schemes. There is no need to sound the alarm bells just yet as the 9.5m sq ft development pipeline is only slightly above the average level of activity recorded in the past 10 years. Of this, 37% is already pre-let.”
All but two of central London’s submarkets are sharing the growth. The City has 10 new construction starts (1.7m sq ft) accounting for 39% of all new activity started in the survey, and just under half of all pre-let development taking place across central London.
The West End has seen a 24% rise in activity driven by 11 new starts in six months.
Construction volumes in Midtown have shot up by 44% with six new starts in anticipation of the imminent infrastructure improvements.
Anthony Duggan, partner and head of real estate strategy at Deloitte, said: “We are now seeing the start of the supply response the market has been expecting. All thanks to the robust economic conditions, strength of London as a global city, tight existing office supply and high levels of leasing deals being transacted.
“However, this increase in activity will not come in time to alter the very tight supply dynamics the office market is currently experiencing. We expect further rises in rents and more pre-let deals on schemes under construction as tenants compete for the limited amount of available space. Looking further ahead, we expect the development pipeline to continue to increase as developer confidence translates to more active construction sites across London.”