London office construction slips down a gear

Aaron Morby 5 years ago

The number of office project starts in central London has dropped to a three-year low as developers continue to delay schemes to take stock of Brexit and rising costs.

New figures from the London Office Crane Survey by Deloitte Real Estate show just 25 projects were started between April and September this year.

This figure is around half that recorded during last year’s peak of 51 and equates to just 1.8m sq ft being added to the development pipeline, which is 21% below the average for six months.

The fall has been concentrated in the City, while the West End has actually witnessed a significant up-tick in start-up activity.

Shaun Dawson, head of insight at Deloitte Real Estate, said: “We have seen slowdown in development activity with two crane surveys recording a fall, but total volumes still remain high compared to our long-term average, continuing to stay above 10m sq ft since 2015.

“It is this reduced volume of new space starting that could indicate a slowdown and suggests a cautionary approach by developers over the past year.”

Early trades such as demolition and substructure contractors are showing on average no growth and a small drop in workload expectation respectively, also suggesting the industry is moving into a slower gear.

Tender forecast

Deloitte presently anticipates that price increases for Greater London will stabilise in 2018 to around 1‑2%.
Against general consensus of subdued specialist price inflation, brickwork and roofing contractors anticipate average increases of 10% and 7% respectively, driven by a spurt in residential developments rather than office projects.

Overall construction activity in the capital has dropped 9% to 12.6m sq ft since the previous survey six months ago. This is also down to a wave of projects now coming to completion as 2017 shapes up to see the highest volume of office space opened for 13 years.

Around half of the pipeline under construction is already pre-let.

In the City development activity is down 11% with 7.3m sq ft under construction. Only eight new schemes started during the period. This represents 804,000 sq ft, significantly lower than the 1.1m sq ft average.

In the West End 14 new schemes totalling 657,500 sq ft started construction, the greatest number of new starts recorded in a single crane survey for this submarket.

Alongside existing activity, there is now 1.4m sq ft being built across the West End – a 20% increase since the last survey.

Refurbishment schemes continue to dominate the new starts with 16 offices accounting for 70% of the volume.  Generally smaller in scale than new-builds, the average size of project has dropped from its long-term average of around 97,000 sq ft to 73,000 sq ft.


Latest news

O’Connor Utilities sold to private equity

OCU Group reported to have fetched around £400m
20 hours ago

Rolls-Royce shortlists sites for first SMR factory

Three factories will make reactor, civils and MEP modules for SMR nuclear power stations
51 mins ago

Henry Construction wins £33m Oxford housing estate rebuild

Contractor signs off first deal with A2Dominion
52 mins ago

Carillion collapse hospital hit by more construction delays

Balfour will take another 18 months to complete Midland Met scheme
16 hours ago

Leeds college launches new construction and football course

Students can now combine site and tech skills with learning at a football academy
59 mins ago

Willmott Dixon blasts new Building Safety law

Rick Willmott accuses Government of scapegoating construction over its own regulatory failure
23 hours ago

£550m plan to redevelop The Galleries centre in Bristol

Shopping centre building to be demolished for major mixed-use scheme
22 hours ago

Costain cancels supply chain event on £260m road job

Preparation work for A1 upgrade stalls as Transport Secretary dithers over approval
23 hours ago

£170m London Holborn Circus office approved

Demolition work set to start in the autumn for 10-storey office block
23 hours ago

City leaders launch net zero construction skills drive

City of London leader warns "skills gap and labour shortage are threats to our net zero ambitions"
22 hours ago

Marlborough Highways lands £32m Islington civils deal

Contractor to help with north London borough's green drive
23 hours ago

Osborne makes £45m construction loss

Sale of infrastructure business balances books as contractor looks for zero-carbon wins
4 days ago

John F Hunt forecasts record revenue and profits this year

Demolition contractor back on strong financial footing after previously setting aside £5.6m for bid rigging probe
4 days ago

Notting Hill Genesis names £2.8bn framework winners

26 firms land places on main contractor deal: Full list
4 days ago

Green light for dual hotel scheme at Nine Elms

Two new hotel towers will share common basement
4 days ago

Trials start on cement-free pre-cast piles

Aarsleff is hopeful a product will come to the market shortly
4 days ago

Ex-Telford Homes boss to run green house builder

Jon Di-Stefano takes helm at M&G backed Greencore Construction
4 days ago

Subcontractors told to stop work on Brymor sites

£80m revenue southern contractor files letter of intent to enter administration
5 days ago

House builder Chartway sold to private equity firm

Cabot Square Capital signs another major construction deal
5 days ago

Murphy Group appoints new chairman

Capita chairman and investment banker John Cresswell to start in November
5 days ago

Tolent seals £40m Newcastle ‘future-living’ housing job

135-home Vaux scheme will be first of four neighbourhoods totalling 1,000 homes
5 days ago

Cruden takes first job at £1.3bn Edinburgh Waterfront scheme

Preferred bidder named for first 750 net zero homes at new Granton Waterfront coastal town
5 days ago

Trio of student towers to be built at Brent Cross Town

Ground works under way with main contractor due to be appointed next month
5 days ago

Keltbray gets start date for £50m motorway upgrade

Contractor hails "significant step forward" for highways business
6 days ago

Site workers settle for 5% pay increase

Contractors and unions agree one-year deal following months of talks
7 days ago

Rising wages and skills gap to overshadow materials issues

Materials and product Inflation tops 20% so far this year, but labour set to be next big headache
6 days ago

Erith pays £2.8m bonus to staff after ownership switch

Around 450 staff have on average received over £6,000 since move to employee ownership five years ago
6 days ago

Algeco lands £19.2m Leeds modular school scheme

Offsite specialist will supply and install 192 steel frame modules
6 days ago

Eight firms placed on £750m Midlands and Eastern framework

Next generation framework for jobs up to £7.5m employs a parallel plotting structure
6 days ago

Aston Villa unveil plans for £100m stadium expansion

Construction set to start next year on first phase of Villa Park upgrade
6 days ago

Contractor services