Deloitte Crane Survey reports higher construction and leasing activity
The latest London Office Crane Survey from Deloitte Real Estate strikes a positive note, with 9.7m sq ft of office space in Central London now under construction – the highest for four years and an increase of 8% over the past six months.
Letting activity is also up on buildings under construction, with 33% of space under construction in Q1 2013 pre-let – “the equivalent to six Shards,” the firm points out, compared with just 1% in 2011.
Anthony Duggan, partner and head of research at Deloitte Real Estate, says the rising construction and leasing activity reflect the improving sentiment in the London office market. “Importantly, a number of the ‘bellwether’ vacant schemes across London are now transacting, reducing the ability of potential occupiers to sit back and wait for conditions to improve. This is likely to add a little more urgency into the leasing market over the next few months,” he adds.
In the City, nearly 4.5m sq ft is under construction, up 10% since the previous survey in November 2012. After the lowest level of office completions in the Square Mile for more than 25 years in 2012, the market has readjusted back in favour of the landlord, Deloitte Real Estate says, as the supply of existing space begins to reduce. Occupiers are now starting to find themselves in competition for reducing tranches of space, the firm adds. Leasing activity of City office space under construction has almost doubled from six months ago.
A total of 1.6m sq ft of West End offices will complete this year, the firm says, as developers in this area were quick to react to the improving conditions after a low level of completions in 2011. This is the highest level of completions for seven years. Occupier sentiment is improving, according to the survey, despite the relatively high availability of Grade A stock. While 400,000 sq ft of Mayfair office space will be delivered this year, the main focus is on other areas of the West End. “North of Oxford Street and Victoria particularly are emerging as attractive locations with developer confidence driving construction activity and occupier demand driving rental rises of 74% and 51% respectively (since 2009),” the firm says.
Some smaller office submarkets in London are also gaining momentum, with King’s Cross seeing a 68% jump in new floorspace since the previous survey and now with 800,000 sq ft under construction. Midtown now has 722,000 sq ft under construction and Southbank 982,000 sq ft, Deloitte Real Estate points out.
