12% increase in Central London office development

Drivers Jonas Deloitte publishes Winter 2011 London Offices Crane Survey

Article posted: 29 Nov 2011

Despite the economic uncertainty, the recovery in development activity seen six months ago has been sustained over the last six months with 22 new starts recorded. According to the latest Drivers Jonas Deloitte Crane Survey, the total amount of office space in Central London now under construction has increased by 12% to 7.2m sq ft (from 6.4m sq ft six months ago and only 2.7m a year ago).

The latest survey observes the trend for comprehensive refurbishments, noting some developers are holding back on the demolition ball, in favour of this quicker to complete and often cheaper delivery strategy. Another clear trend is that the schemes being started are significantly smaller than six months ago. Whilst there are only three fewer schemes than last survey the total volume of space started over the last six months has fallen 66% and the average new scheme size has fallen from 195,000 sq ft to 72,000 sq ft.

The London crane survey records seven new starts with a total of 3.1m sq ft of office space in the City of London under construction – an 11% increase on six months ago. The increase in new starts is also the result of a number of significant refurbishments of existing buildings bringing a total of 362,000 sq ft across five sites, the largest being 135,000 sq ft at 199 Bishopsgate, EC2, being refurbished by British Land and Blackstone to be completed in Q3 2012.

The squeeze on available Grade A office space in the West End continues as eight new starts are recorded this survey totalling 2.3m sq ft under construction. Of this, 1.1m sq ft is scheduled to be delivered in 2012 over 12 projects, five of which are new builds.

In contrast to the City, the current pipeline of construction that is underway stops at the end of 2013 and the survey suggests we will see several new projects start next year in order to deliver in 2014. Grade A space is again becoming an increasingly rare commodity in the West End and currently amounts to just 9% of the total available space. The greatest squeeze is in the office space submarket of Noho with vacancy at just 3% as occupiers see this area as a credible alternative for traditional occupiers of office space in Mayfair. The squeeze is equally as tight for Grade A office space in Soho although this is expected to be remedied in part with the delivery of 248,000 sq ft across three buildings that are currently underway.

The crane survey continues to detail activity in London’s other markets and interprets Midtown as remaining active with four new starts, totalling 178,000 sq ft. Although the number of new starts is down on the last survey, the total volume of floorspace being constructed is now up three-fold on the level seen in 2010 with a total of 10 schemes now underway delivering 643,000 sq ft over the next two years.

The market for office space in Southwark continues to flourish with the addition of two new starts this survey delivering 55,000 sq ft of new space and a refurbishment of 17,000 sq ft of expansion space, but across town development of office space in Paddington remains quiet with no office construction activity starting for over a year now. Similarly in East London no new starts are scheduled in the near future on the development office space in the Docklands, E14.

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Posted by Janet