London office construction continues to rise

Central London is continuing to experience soaring levels of office construction, with latest figures showing the total volume of building space rising by 18% in the last 6 months.

The figures come from the London Office Crane Survey published by Deloitte Real Estate in November 2015, which documents 11.1m sq ft now under construction, with 26 new schemes starting during a 6-month period.

There has also been a 15% rise over the past 6 months of the amount of lettable space under construction, now standing at 7m sq ft. Technology, media and telecoms firms have taken up 44% of the let space under construction, followed by the financial sector with 27%.

Construction in the City has risen by a quarter, with 13 new starts taking the total amount of space being built in the City to 5.7m sq ft.

Steve Johns, head of City leasing at Deloitte Real Estate said: “Cranes will be dominating London’s skyline for the foreseeable future as construction activity keeps pace with healthy occupier demand. Looking ahead, developers’ sentiment remains high, as 21 of the new starts totaling 2.6m sq ft are speculative developments.”

However, 2015 is expected to deliver the lowest levels of construction completions in three years, with several schemes being delayed into 2016.

Will Matthews, head of research at Deloitte said: “Looking ahead though, the development pipeline for 2017-19 is filling up as work commences on new schemes. We have also recorded a further 24% upsurge in sites being demolished and readied for construction, meaning early indications are that space completed in these years will exceed the long-run average.

“Developers will be mindful of the fact that this rise in office construction comes at the same time as high levels of residential and infrastructure development, increasing competition for available construction capacity.

“Ultimately the rise in office development recorded in our latest crane survey comes after five years of relatively low delivery, which has exacerbated the current shortage of available Grade A stock. This new space will not be completed for some time and we forecast further upward pressures on rental levels in the short term.”

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