Deloitte’s London Office Crane Survey calculates that there is 7.7 million square feet of office space under construction in the capital, down from 9.2 million square feet six months ago and the long-run average delivery of around 10 million square feet.
The 3.7 million square feet of new office space completed in the past six months represents a 10-year high, Deloitte says.
However, despite the downturn in total volume, there has been an increase in new starts. Twenty-two new schemes have started in the past six months, providing 2.1 million sq ft of new office space. This is almost double the volume of new space started compared to the previous six months.
Steve Johns, head of City leasing at Deloitte Real Estate, said: “The sharpest rise in construction starts is in the City of London, where 10 new office buildings are now underway. This includes over a million sq ft in the City core and over 500,000 sq ft in ‘tech city’, accounting for three quarters of the volume of space across all the new schemes we’ve recorded. The West End has also seen 10 new starts, adding 462,000 sq ft to the development pipeline, while Southbank, Midtown and Docklands have seen no new construction this survey.”
Mr Johns added: “Office construction is down 17% in the last 6 months, but we have seen 3.7 million sq ft of completions over the last six months, a 10 year high. To put that into context, a third of this space is within two City towers, with the remaining space across 22 central London buildings. However, 58% of this space was leased before completion, demonstrating the strength of occupier demand. Similarly, of the total 7.7 million sq ft of space under construction, 41% is already let. Despite a healthy pipeline of activity, 2015 is likely to deliver the lowest volumes of space in 20 years.
“With occupier demand expected to remain strong we foresee further increases in pre-letting activity, and demand for the best space to exceed new supply for the next three years. Nevertheless, with over five million sq ft now being demolished - a rise of 18% in six months - developers are racing against the clock to deliver buildings while new supply remains relatively low.”