London Office Development

The Deloitte Crane Survey Summer 2019 has just been published with data contributed by Metropolis and Cityoffices. In this blog we look at the main survey findings and some of the other additional trends that were not highlighted in the final report.

Last year the survey reported that after a small dip in Q3 2018. However in Q1 2019 the volume of London office space under construction has risen 12% to 13.2m sq ft. There were 37 new schemes started in the last six months. Major new starts included the 611,000 sq ft Facebook HQ at Kings Cross and the 245,000 sq ft 1 Finsbury Avenue, EC2.

Deloitte highlight a trend towards refurbishment construction projects in the City of London, whereas Kings Cross is leading the new-build starts. The City will see completions in 2019 to towers at 22 and 100 Bishopsgate, with more office towers planned.

Some 6m sq ft of office space is planned for completion in central London in 2019, matching the 2018 figure. Occupiers are jostling for the new space with 55% of the space due for completion this year already pre-let. Finanancial services, technology and serviced office occupiers are particularly active. The fringe areas of Southbank including Battersea, Kings Cross and Paddington are attracting more pre-lets than the West End.

Deloitte conclude that new Grade A office space availability is falling with 30m sq ft currently in the pipeline, which represents a 23% fall in the last two years. However, London’s office pipeline is always waxing and waning. The recent short term trend and looking back historically cannot be relied upon in the longer term. Indeed, the number of schemes at demolition or site preparation stage, such as the Leadenhall  Triangle, Ropemaker and 6-8 Bishopsgate, continues to be healthy. Research showed that 6.5m sq ft of central London offices are poised to start construction in the latter half of 2019, giving a healthy pipeline going forward.

Looking at planning applications over the last year in central London, in numbers terms, there is a trend towards refurbishment applications over new-builds. New applications for schemes in the pipeline such as 1 Undershaft could skew this trend back towards new builds again. Demand from London office tenants continues to underpin developer plans for the next wave of building.

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