The London Office Crane Survey reveals largest volume of office space delivered in London since 2004
London saw 3.9 million sq ft of new office space complete in the last six months, delivering the largest volume of office space in central London for 13 years. The London Office Crane Survey, published by Deloitte Real Estate, has recorded 28 new construction starts over six months, compared to 40 in the previous survey. In terms of volume, this adds 3.2 million sq ft into the development pipeline, a rise of 13 per cent. Despite this, the total office space currently under construction across the capital is 13.9 million sq ft, a six per cent decrease from the previous survey (14.8 million sq ft).
Shaun Dawson, author of the London Office Crane Survey at Deloitte, said: “The sheer volume of completed space is no surprise given the surge in development activity 18 months ago. In total 4.4 million sq ft completed in 2016 and this momentum has continued into 2017, we expect this year’s annual total delivery to be the highest since 2003.”
The City continues to dominate development activity with 10 new schemes totalling 1.9 million sq ft taking the City’s construction pipeline to 8.2 million sq ft. This represents a seven per cent decrease, but comes on the back of a number of large schemes having completed in the last six months. However, the largest decrease in construction activity was recorded in the West End, down 27 per cent in six months. This is notwithstanding the addition of nearly half a million sq ft across eight schemes starting construction. Other markets remain active with Midtown and Southbank’s development activity increasing by 9 per cent and 6 per cent respectively.
Occupier demand remains resilient with 43 per cent (six million sq ft) of space currently under construction already let. Dawson added: “Good quality new stock is attracting significant tenant demand with 10 of the new schemes starting construction already achieving leasing success and of the 3.9 million sq ft of completed space, half was pre-let. This early leasing activity has softened the impact the volume of space completing has on the market.”
Trending this survey are new-builds compared to refurbishment projects. New-builds now account for the largest share of the new space starting construction – 2.6m sq ft, pushing the average size up from 70,000 sq ft to 113,000 sq ft.
Nigel Shilton, managing partner at Deloitte Real Estate, added: “The decrease in overall volume of space under construction could suggest that developers have slowed down, yet this is more a result of timing and two years of elevated levels of construction completing rather than developers holding off. Demolition levels remain high at 7.9 million sq ft, which chimes with the sentiment of our surveyed contractors who expect a rise in workload over the coming 12 months. Looking at the development pipeline, we forecast around 39 million sq ft to be delivered by 2021. Very few schemes have been cancelled, highlighting continuing developer confidence.”
About the London Office Crane Survey:
Deloitte Real Estate’s London Office Crane Survey was first published 21 years ago, and is updated every six months, with the last edition released in November 2016. The data in this report is correct as at 30 March 2017, and covers seven major central London office markets: The City, West End, Docklands, King’s Cross, Midtown, Paddington, Southbank, Vauxhall-Nine Elms-Battersea, White City and Stratford.
Deloitte Real Estate’s collection of central London development data commenced in 1985, and the first London Crane Survey was published in 1996.
The crane survey is the definitive review of office construction in central London, and is seen as a barometer of developer sentiment and future office supply. The report measures the volume and impact of office development (new build or significant office refurbishments of 10,000 sq ft or more) currently taking place across central London and analyses the pipeline of future development over the next five years.
Deloitte Real Estate’s commercial property research team is focused on producing thoughtful and insightful publications, as well as comprehensive bespoke reports for investors, developers and occupiers.
For further information on the Deloitte Crane Survey click here