Signs of Recovery for London Office Construction
The Financial Times recently published a news article on the latest from Deloitte Real Estate report, which highlights the state of Central London’s office space construction.
London is building 9.2m square feet of space equivalent to 15 Shards. Deloitte Real Estate reveals that rising confidence amongst developers and occupiers has raised office building construction to pre-recession levels in Central London. Although construction in the City seemed to have slowed down recently with only one building being built over the last six months, in the West End however, 10 buildings have started in the same period.
A significant 50 percent of the 16 projects that are yet to be completed in the next three years (amounting to more than 10,000 sq ft) have already been let to tenants.
Office lettings on the rise
Although construction increased, a rise in office take-ups in the last 12 months has resulted in the availability of spaces falling to its lowest level since 2007. The reason for the office take-ups is the result of the recession and recovering economy, combined with development hiatus and expired leases signed after the 1980’s Big Bang. There is only five completed buildings on the market at present to accommodate lettings of 100,000 sq ft or more. The supply crunch is being felt in prime locations with higher rent.
Anthony Duggan, partner and head of research at Deloitte Real Estate says that supply is expected to recover only in 2017. It is the developers who started to build in 2010 and 2012 (when first signs of an economic recovery appeared) are the ones who are reaping the benefits of meeting demand for reduced availability spaces, increased tenant demand and profits from rental growth. The shortfall in demand with limited supply and lack of choice for occupiers will only see further rises in pre-lettings over the next year and 18 months said Mr Duggan.
Space let by sector
Telecoms, media and technology companies are the highest occupiers in the South Bank and Kings Cross areas. The Google HQ is also expected here in 2016. Deloitte states that medical services are the largest new tenants in the Docklands. Insurers are snapping up most space in the Square Mile.