London Office Development and Pre-lets

(April 2013, abridged)

Metropolis has recently completed its bi-annual survey of the central London office development market. Despite the national economic woes and the virtual stagnation of office construction in UK regional markets, there are now 86 office schemes under construction in central London (56 a year ago) totalling 11.6m sq ft (8.6m sq ft a year ago).

In the last six months there have been 31 new starts, including major new-builds such as the 188,000 sq ft Zig Zag Building in SE1 and the 314,000 sq ft Aldgate Tower scheme in E1.

However, the office construction market continues to be dominated by refurbishment starts, with 20 out of 31 (65%) of the new starts in the last few months being substantial refurbishments. These include projects such as 7-11 Bishopsgate, EC2; Carmelite House, 50 Victoria Embankment, EC4 and 39 Victoria Street, SW1.

There continue to be development lows in Soho, Paddington and Docklands. Schemes currently at site preparation stage and expected to start in 2013 total over 5m sq ft including Land Securities’ Victoria Circle in SW1: Viridis Real Estate’s 25 Chancery Lane, WC2 and Amsprop’s 5 Cheapside, EC2.

Despite a number of new-build starts planned this year, over half of the new schemes with provisional 2013 start dates are refurbishments.

graph1

In terms of the companies most involved with these planned schemes, the developers with the most refurbished space in the pipeline include: Argent, Derwent London, British Land, Land Securities, Stanhope, Henderson, Crown Estate, Aldgate Developments and GPE.

The architects involved with the most future space due for refurbishment are: Sheppard Robson, Make, Allies & Morrison, EPR, Rolfe Judd, Squire & Partners, Siddell Gibson and Eric Parry.

In addition to speculative schemes, the long-trailed retro fitting market is now fully underway as PwC begins work on turning its 350,000 sq ft 1 Embankment Place offices in London, WC2 into a more sustainable building. Elsewhere, the Government has earmarked 400 of its own buildings for retro-fitting. In the West End, land assembly for new office schemes is being hindered by strong competition from residential conversions.

Return of the pre-let

In terms of pre-lets, recent signings have begun to inject some pace into the market. Some 3.1m sq ft of current schemes has been pre-let already. Schemes wholly are partly pre-let include the newly started Bloomberg building in EC4, a host of lettings at 20 Fenchurch Street and the Leadenhall Building, EC3.

The numbers of pre-lets is rising as the figures below taken from the Metropolis database show:

pic2

In conclusion, development completions in central London should reach over 4m sq ft in 2013, in line with the long term average. The current cautious approach of occupiers to relocation decisions and lease renewals suggests that take-up this year will broadly resemble the 9m sq ft of lettings in 2012, although there are some indications of a likely rise in 2014.

Construction looks likely to keep rising, particularly in the City and the City fringe, with a number of large schemes planned for starts in the next two years.

(C) Metropolis Property Research Ltd 2013

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: