Central London Development Update

Keep calm and carry on refurbishing (Oct 2013, abridged)

Metropolis has just completed its bi-annual survey of the central London office development market. In the last six months work has begun on 35 office schemes in the main London office districts, accounting for a further 3.3m sq ft of offices under construction. In the same period 2.7m sq ft of office space was completed in 32 developments. In total there is now 10.4m sq ft of offices underway in central London in 77 schemes.

Amongst the major new starts are Crown Estate’s 140,000 sq ft 169-183 Regent Street scheme in W1, Mitsui Fudosan’s 168,000 sq ft 70 Mark Lane and Land Securities’ 375,000 sq ft 30 Old Bailey, EC4.

However, the office construction market continues to be dominated by refurbishment starts, with 24 out of 35 (68%) of the new starts in the last few months being substantial refurbishments. These include projects such as 180 Wardour Street, W1; 1 Aldermanbury Square, EC2; Bush House, WC2 and 1-2 Welbeck Street, W1.

Major schemes currently at site preparation stage and expected to start in 2014 total over 5m sq ft, including Land Securities’ 1 New Square, EC4: Oxford Properties’ 500,000 sq ft London Wall Place, EC2 and Great Portland Estate’s 12-14 New Fetter Lane, EC4 which has been pre-let.

OSBA

More pre-lets stoke the fire

In terms of pre-lets, recent signings have injected more pace into the market. Some 3.2m sq ft of space within current schemes under construction has been pre-let already.

There is some 600,000 sq ft of office space in newly-completed and under construction buildings under offer, for deals expected to complete in the fourth quarter of 2013. The TMT sector remains strong accounting for up to 30% of deals.

The rise in demand for office space is causing some occupiers to be pushed out of core West End locations to take space in schemes in surrounding areas including North of Oxford Street, Soho and Midtown.

LOPBY

In conclusion, development starts and completions in central London are climbing, with early marketed space (12 months from completion) rising to 5m sq ft, from 4m sq ft a year ago. However, it is important to note that that the largest uplift in letting activity has been in the secondhand, rather than the grade A new space category, as the majority of occupiers continue to show caution with relocation decisions.

It is likely that much of the space currently under construction will be let after completion rather than pre-let, a view supported by the recent raft of deals at the 2010-completed Walbrook Building in EC4.

 

(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: