The number of new office schemes started in London in the year to the end of March has reached a 20-year high, according to Deloitte Real Estate’s London Office Crane Survey.
A dearth of office stock in the capital has sparked a surge in development and construction volumes have increased by 28% to 14.2m sq ft since the last survey six months ago.
New starts have risen to 51 – a record high – surpassing the average 19 and the highest number of 37, in 2007.
Submarkets
Midtown has seen the greatest percentage jump in development, with activity up by 58%, predominantly thanks to major projects including the 843,000 sq ft Goldman Sachs scheme at 70 Farringdon Street, EC4.
The nine new Midtown schemes add more than 1.2m sq ft to the pipeline – the highest volume and highest number of new starts ever recorded in the area.
In The City, 26 new schemes are under way, comprising 2.9m sq ft, the largest amount of construction activity recorded in the submarket.
Elsewhere in London, the South Bank and King’s Cross recorded two new starts and starts in the 12 West End amount to 426,000 sq ft, highlighting the smaller-sized developments.
There were no new starts recorded in Paddington, although the survey does not account for proposals which are in the planning process.
Survey snapshot
| London submarkets – click on image to view the findings | ||
|---|---|---|
 Central London |
 Docklands |
 King’s Cross |
 Midtown |
 Paddington |
 South Bank |
| Submarket | Starts | Total amount completed this survey (m sq ft) | Total under contruction in (m sq ft) | % prelet |
|---|---|---|---|---|
| West End | 12 | 0.6 | 2.2 | 38 |
| The City | 26 | 0.4 | 8.2 | 30 |
| Docklands | 0 | 0 | 0.7 | 38 |
| King’s Cross | 2 | 0.04 | 0.7 | 100 |
| Midtown | 9 | 0.5 | 2.1 | 57 |
| Paddington | 0 | 0 | 0.2 | 25 |
| South Bank | 2 | 0.2 | 0.1 | 43 |
Occupier demand
The rise in preletting activity over the past two years is starting to feed through to construction schemes, with the TMT and financial sectors dominating take-up.
While the rapid pace of development sees 38% schemes due to complete in 2017, 42% of space has already been let, allowing scope for further activity.
Low availability appears to be encouraging developers to commit to further new starts. Demolition activity has risen by more than 10% over the past six months, suggesting a confidence in the market despite the geopolitical climate.
Deloitte forecasts space under construction will rise to 16m sq ft.
Emerging markets
Looking ahead, particularly with the completion of Crossrail, London’s key office market is set to expand following the establishment of new business districts.
Vauxhall, Battersea Nine Elms, Stratford and White City have all been tipped has submarkets to watch and are benefiting from large-scale investment, with 10m sq ft of office space anticipated in these areas.
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